News & Analysis

Trade tensions continue to drive stocks lower; Yen surges to majors in flight to safety; Oil holds from $64 – remains cautious

Jun 20, 2018 | Daily Market Outlook

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U.S. stocks continued their migration south. The Dow settled 287.26 lower, the S&P500 lost 11.16 and the NASDAQ fell by 21.44. The Dow closed lower for the 6th day in a row. Trade tensions continue to be the key driver.

“With each escalation, you get more worried that things will get out of hand,” said Bob Phillips, managing principal at Spectrum Management Group. “I know Trump wants to do something to help out blue-collar workers, but … each time you ratchet this up, China has to come out strong.”

Further tension in U.S.-China relations could end up hurting some iconic U.S. companies the most, said Jim O’Neill, an economist and the chairman of think tank Chatham House.

“I often say to people that America’s most iconic modern company, Apple, has for three years sold more iPhones to Greater China than it has to the U.S. So ultimately, if the U.S. genuinely takes this kind of belligerent stance, it’s going to be the U.S.’ best-growing companies that will suffer,” O’Neill told CNBC.

Europe ended in the red, as market-watchers across the globe continued to show concern over the possibility of a trade war between the U.S. and China. The pan-European Stoxx 600 provisionally ended 0.7 % down, off its session lows. basic resources were the worst performing sector Tuesday, off 2.47 % by the close. Kaz Minerals was the sector’s and the STOXX 600’s biggest loser, slipping 6.8 %. Other sectors to post heavy losses included autos, industrials and technology.

The FTSE lost 27.48 pts – The DAX 156.14 and the CAC dropped 59.89 pts.

Oil retreated but fought back from session lows. An escalating trade dispute between the United States and China unleashed sharp selloffs in many global markets. OPEC and partner Russia are expected to gradually increase output in order to make up for involuntary losses in Venezuela and potential shortfalls from Iran. USOUSD hit 64.17 at session lows before buyers parred some losses. Price finished the session 79 cents lower. 64.00-64.05 continues to act a short-term low.

Gold traded in a $14 range, hitting a high of 1284.05 and a low of 1270.35. Sellers won the day price closing $3.40 lower. Safe haven status wasn’t enough to entice buyers as USD strength hurt demand.

The Japanese Yen jumped in the Asian session and continued strongly late into the London session sending the majors sharply lower during the day. Risk pares hitting triple digit falls during the day. Buyers parred some loses into the US session but safe havens where the order of the day due to trade tensions. The USD jumped to the CAD, price surged adding 89 pips closing above 1.3280. Risk closed sharply lower to the USD, the EURUSD made a late fightback. The AUDUSD was hard hit dropping 46 pips hitting .7346. It did recover a touch to close at .7375.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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