News & Analysis

Tariff broken record sends stocks lower; Oil dumped on supply worries; USD fires back – USDJPY surges above 112

Jul 12, 2018 | Daily Market Outlook

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21:30 EUR ECB Monetary Policy Meeting Accounts
22:30 USD CPI – Core CPI

New tariff news sent shockwaves through equity markets overnight. The U.S. seeing solid falls. The Dow Jones lost 219.21. The Dow snapped its longest winning streak in about a month after the Trump administration published a list of 10% duties on $200 billion worth of Chinese goods. Shares of Boeing and Caterpillar — two companies with high overseas revenue exposure — fell 1.9% and 3.2%, respectively. –CNBC The S&P500 lost 19.21 hit hard by a plunging energy sector that lost over 2%.

“The sharp market reaction to last night’s announcement by the Trump administration … shows how sensitive markets remain to any tariff news,” says Jeffrey Kleintop of Charles Schwab.

European shares finished in the red, trade worries continuing to hurt trader confidence. Basic resources plummeted over 3%, while oil and gas closed 2.3% below the flat line. President Donald Trump said in Brussels that Germany is “totally controlled” by Russia. The comments could lead to heated discussions at a NATO summit starting today, the first leg of his European tour. The Euro Stoxx 50 lost 46.51, the FTSE belted losing 100.08 pts and the DAX lost 192.72. ECB policy makers are split on the timing of the first future rate hike.

BoC held rates as expected overnight, Governor Poloz did advise that higher rates will be needed and that inflation is on target, economy operating near capacity. This failed to help the CAD as plunging oil prices sent it sharply lower.

Oil dived last night losing 5%, posting its worst day in 5-years. Traders faced multiple negative influences. Posible new tariffs on another $200 billion of Chinese goods. Trade tensions put pressure on commodities markets. Supply – Libya resolved a major disruption to its crude exports and Saudi Arabia reported a big jump in output for June. The U.S. could consider waivers on sanctions against Iran. That’s a smart play by the U.S as President Trump has been calling on OPEC to limit oil price increases. USOUSD lost $3.50 finishing below $70.

The USD jumped in last night’s trade finishing sharply higher to the majors. The AUD hit hard by trade tensions losing 90 pips finishing back below .74. The USDJPY broke out confirming a long developed ascending triangle. The Yen failed to fire last night. Risk currencies finishing higher bar the AUD but it did finish off lows. Gold tanked losing $13, price getting close to July lows.

Today risk is higher to the Yen and flat to higher to the USD. Traders will be looking to tonight’s US CPI data. US inflation pushing to 2.3% Y/Y.

Local stocks are higher as traders look past the continuing trade war worries, the ASX200 recovering some of yesterday’s losses trading 43.90 pts higher. Asian indexes are also in the green, Nikkei +239.79 – Hang Seng +108 – Shanghai composite +38.

Bitcoin lost ground yesterday before recovering from its lows. Today sellers are back at it, their target to continue the current short-term downtrend is a break of 6250.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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