Axi | Jun 26, 2018 09:28
Originally published by AxiTrader h2 Market Summary (7.46 am Tuesday June 26)/h2
Here’s the takeaway.
The White House, and especially President Trump’s belligerent trade team, may have a glass jaw.
I say that because while it is happy to bluster and threaten other nations when the Dow drops 500 points on the back of a story that the Administration is going to impose restrictions on China – one consistent with previous on the record comments – we see Treasury Secretary Mnuchin and trade attack dog Navarro walking things back.
Everyone has a plan until they get punched in the mouth.
The washup was that after Mnuchin tried to walk the market back and it failed, the White House rolled out Navarro to say there are no plans on investment restrictions on China and the market slide was an “overreaction”. He also channeled his boss saying “things will work out with China”.
Glass jaw.
The comments certainly helped drag US stocks higher and sent USD/JPY soaring as the robots followed their headline chasing algo’s. But human’s are not so convinced yet. So, at the close the S&P 500 was 1.37% lower at 2,721 for a fall of 38 points but that was a reasonable distance from the low around 2,698. The Dow closed 328 points lower at 24,252 while the Nasdaq 100 dropped 2.2% as the “maybe not a safe haven” meme seemed to infect tech. Folks now fear that China will “punch back”.
Naturally, the fear of trade wars hurt European stocks as well. More so than Asia strangely, but I guess that’s because Europe’s close was when US markets were still under intense pressure. Thus, there may be a catch-up rally this afternoon when Europe opens after the DAX fell 2.46%, the CAC dropped 1.92%, and the FTSE in London lost 2.24%.
Here at home SPI traders have had a dose of the reality the ASX can only stand-alone form global markets for a short time. September futures are down 59 points as a result pointing to a soft day ahead.
To forex then and the US dollar suffered as sentiment shifted against the Greenback in the wake of the trade war news. My sense is the US economy is still the better place to be and thus the US dollar will recover. But at every turn in the trade war headlines on escalation have initially been met by dollar selling.
As a result, the US Dollar Index is down 0.2% at 94.32, the euro is at 1.1703 up 0.4% just a little below the high of 1.1712. The 1.1730/1.1850 should again pull the euro’s rally up. USD/JPY fell to 109.36 but it’s back at 109.76 now after a leap to 110.03 on the Navarro comments. Pound is at 1.3279, largely unchanged.
On the commodity bloc the Aussie dollar has done better than it should have, given the sell-off in risk and global growth assets. Copper dropped 1.35% to $2.99 a pound which is suggestive of a short-term AUD level around 0.7350. Yet the batller is hanging tough with AUD/USD at 0.7409 down just 0.39%. The kiwi is off just 0.16% at 0.6895 while the Canadian dollar gained 0.2% to 1.3294.
Elsewhere on commodity markets gold fell again, losing 0.2% to $1,265. I’ve still got a test toward $1235/40 penciled in. Oil was lower too, but Brent recovered from the early selling in Asia to post a 0.78% loss to sit at $74.96. WTI did better in Asia but played catch up overnight and has lost 0.71% to $68.09.
A day of turmoil saw US rates strangely quiet. The 10-year is at 2.88%, where it was in Asia yesterday and the 2's are at 2.54%. Bitcoin gained from the carnage though, respecting this important $6,000 region with a 3.4% bounce back to $6,273.
On the day today, it will be interesting to see how Chinese markets – stocks and commodities – react to Navarro’s comments. That will be a scene setter. Here at home it’s a speech by the RBA’s Tony Richards at a payments conference that’s the highlight :S Offshore it’s quite but I will be watching the Richmond Fed manufacturing index, and the speeches from Bostic and Kaplan.
Have a great day, it might not be as 'tin hat' as it looked a few hours ago.
h2 Here's What I Picked Up (with a little more detail and a few charts)/h2 h2 International/h2
the WSJ reports . “In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” the Chinese leader said, according to the people. “In our culture we punch back.”
h2 Australia/h2
h2 Commodities/h2
Have a great day's trading.
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