U.S. Opening Bell: Additional Tariff Threat Hits Stocks; USD Slides, Oil Gains

Key Events

European equities and stock futures on the S&P 500, Dow, NASDAQ 100 wavered on Monday, as the US pressed ahead with a new batch of tariffs on Chinese imports, exacerbating trade tensions. An ongoing exodus from emerging markets currencies supported the dollar from a harder fall, though the buck still gave up all its Friday's gains.

The Europe-wide STOXX 600 opened 0.1 percent lower, then found firmer footing, only to slip back into the red by late morning session. Carmakers and miners, which could take a hit in a less competitive export environment, led the decline.

The FTSE dipped 0.1 percent on Monday as a stronger pound prevented the London index from pushing above the 7300 level. A boost for oil majors and telecoms stocks wasn't enough to push the FTSE into the green.

Earlier, during the Asian session, Chinese shares bore the brunt of the selloff which followed the news that President Donald Trump instructed aides to impose an additional $200 billion in tariffs on Chinese imports—a move that could be made official as soon as today.

In parts of Asia, geopolitical headwinds weren't the only disrupters this morning. Hong Kong’s Hang Seng underperformed, losing 1.30 percent, in the aftermath of Typhoon Mangkhut, the most powerful storm this year and responsible for more than $29.1 million in damages. The mainland’s Shanghai Composite dropped 1.11 percent, for a two-day slide of 1.3 percent.

The Shanghai Composite closed at 2651.79, the lowest level since November 28, 2014, after posting a trough lower than the January 28 close 2655.66. Technical purists would wait on declaring a major support break till the intraday 2638.30, registered a day earlier, is violated.

Korea’s KOSPI edged 0.66 percent lower. Australia’s S&P/ASX 200 outperformed, climbing 0.32 percent. A rally in financials outweighed a selloff in healthcare stocks, hit by reports of a public inquiry into the aged-care system. Ironically, today’s leading sector was recently the target of regulatory scrutiny as well.

Global Financial Affairs

Yesterday we argued that US equities look set for further rallies, after traders bought the dip and committed to their positions over the weekend. However, futures this morning seem to suggest lingering hesitation.

The argument could be made that it was two different groups of traders propping up prices over the weekend and sending them lower today, or that these traders are merely riding Monday's global selloff and will show more direction in the upcoming US session.

Meanwhile, the dollar weakness, at least relative to FX majors, may signal that investors are less worried about potential impact of protracted trade tensions and have therefore rotated out of the safe haven currency.

Technically, the DXY fell back below its week-old downtrend line.

WTI crude rebounded from a drop, as a weakening dollar probably helped it offset signs of increased drilling by US producers.

USD losses also helped copper rebound from an earlier slide, though at time of writing it has resumed its slide.

Up Ahead

• South Korean President Moon Jae-in visits Pyongyang for a summit with Kim Jong Un on Tuesday
• The Bank of Japan holds its policy meeting on Wednesday.
• The first of three European Leaders summits kicks off in Salzburg on Wednesday. The UK and EU will try to resolve outstanding issues related to Britain's departure from the bloc and try to reach a a deal before the exit day on 29 March 2019.
• The UK will release inflation data for August on Wednesday, followed by retail sales on Thursday.

Market Moves

All information correct as of time of writing

Stocks

• The FTSE edged 0.1 percent lower.

• The STOXX Europe 600 fell 0.2 percent.

• Futures on the S&P 500 dropped 0.2 percent.

• The MSCI All-Country World Index ticked 0.2 percent lower.

• The MSCI Emerging Market Index slipped 1.2 percent.

Currencies

• The British pound increased by 0.3 percent to 1.3112.

• The Dollar Index lost 0.15 percent.

• The euro was 0.32 percent higher at $1.1660.

• The Japanese yen gained 0.04 percent to 112.03 per dollar.

• The Turkish lira gave up 1.5 percent to 6.2661 per dollar.

• The Indian rupee inched 0.9 percent lower to 72.523 per dollar.

• The MSCI Emerging Markets Currency Index fell 0.4 percent.

Bonds

• Britain’s 10-year yield climbed less than one basis point to 1.53 percent.

• The yield on 10-year Treasurys fell one basis point to 2.99 percent.

• Germany’s 10-year yield was unchanged at 0.45 percent.

• The spread of Italy’s 10-year bonds over Germany’s slid eight basis points.

Commodities

• The Bloomberg Commodity Index slipped 0.2 percent.

• West Texas Intermediate crude ticked 0.3 percent higher to $69.19 a barrel.

• LME copper dropped 1.3 percent to $5,895.50 per metric ton.

• Gold gained 0.1 percent to $1,195.47 an ounce.