US Open Preview – European stocks tumble, dollar stalls as trade worries persist

XM Market Review
XM Market Review

Here are the latest developments in global markets:

  • FOREX: The US dollar traded higher against the Japanese yen by 0.24% after three days of declines. However, the dollar index – which measures the greenback’s performance against six major currencies – fell by 0.10% on Tuesday, and is currently hovering just below the 90.00 handle. Euro/dollar was trading higher by 0.11% during today’s European session, standing marginally above the 1.2300 psychological level. Sterling advanced by 0.17% versus the greenback, hovering around its intraday high of 1.4068. The Australian and New Zealand dollars posted gains against the greenback today. Aussie/dollar rose by 0.37%, after the Reserve Bank of Australia (RBA) earlier kept interest rates unchanged at its monthly meeting. Kiwi/dollar moved higher by 0.58% at 0.7253, while dollar/loonie was down by 0.33% at 1.2871.
  • STOCKSEuropean stocks tumbled as markets reopened after the long weekend. The benchmark European STOXX 600 tumbled by 0.88% for the first day after four green sessions. The blue-chip Euro STOXX 50 was down by 0.90%, while the German DAX 30 dipped by 1.22%, the largest fall in more than a week. The French CAC 40 dived by 0.7%, the Spanish IBEX 35 slipped by 0.87% and the British FTSE 100 declined by 0.51%. In Asia, Japan’s Nikkei 225 and Topix edged lower by 0.45% and 0.29% respectively. In the US, even though the S&P, Dow Jones and the Nasdaq all plummeted yesterday, futures tracking these indices are currently in the green, pointing to a higher open today. Note that yesterday, the S&P 500 closed below its 200-day simple moving average for the first time since the Brexit vote in June 2016.
  • COMMODITIESOil prices fell sharply on Monday after news of rising Russian output and the escalating US – China trade dispute weighed on sentiment. Prices recovered a little today though, with Brent crude oil edging back up by 0.49% towards $68 a barrel, while WTI crude gained 0.52% to $63.34 a barrel. In precious metals, gold prices rose sharply yesterday, but today, they fell by 0.17% at $1,338.6.

Day ahead: All eyes remain on the trade dispute

In terms of economic data, the only noteworthy releases left on the agenda are New Zealand’s biweekly milk auction, which does not have a precise release time, as well as US total vehicle sales for March, due at 1930 GMT.

In equity markets, attention will remain on the recent plunge caused by trade concerns and uncertainties about US tech companies. The next chapter in the trade saga will probably come this week, when the US formally unveils the technology tariffs it announced last week against China. While there is no specific day for the announcement, Commerce Secretary Wilbur Ross said on Thursday that the official declaration will come “very, very shortly”.

After that, China is likely to strike back again, following comments from the Chinese Ambassador to the US suggesting as much yesterday. Media reports indicate the Chinese retaliation is likely to be aimed at US soybean and aircraft exports, bringing into focus companies such as plane-maker Boeing. If this scenario is accurate, then risk sentiment will probably deteriorate further before it recovers, implying more troubles may be in store for major equity indices in the near-term. In the bigger picture though, the overall direction in stock markets could depend on what comes after China retaliates again. Will the US announce its own countermeasures and continue playing the tit-for-tat game, or will the two sides sit down at the negotiating table and reach common ground?

In energy markets, the American Petroleum Institute (API) will release its weekly crude inventory data at 2030 GMT. Investors will be looking for signs as to whether US production has leveled off for now, following the recent decline in the number of active US rigs.

As for the speakers, we have three on the schedule. In the US, Minneapolis Fed President Neel Kashkari (non-voter) will deliver remarks at 1330 GMT, while Fed Board Governor Lael Brainard (voter) will step up to the rostrum at 2030 GMT. In Europe, comments by ECB Executive Board member Yves Mersch will attract attention at 1430 GMT.