U.S. Opening Bell: Trump Trade Salvo Crushes Global Assets; Oil Dips

Key Events

Investors dumped stocks across the board this morning after U.S. President Donald Trump toughened his stance on trade negotiations with China, by threatening to increase tariffs on additional goods from the country, thereby endangering the next round of talks in Washington later this week.

S&P 500 futures opened 1.11% in the red and quickly extended the drop to as much as 2.22%, where they bottomed, paring losses to 1.84% as of the time of writing.

Similarly, contracts on the Dow opened 1.01% in negative territory and continued dropping to 2.21%, until they found demand. They have been congesting since and are now 1.99% lower as of writing.

Futures on the NASDAQ 100 followed a comparable trajectory and opened 0.94% lower, with the drop extending to as much as 2.59%, where they found more stable footing. They have been ranging since, to 2.18% lower as of writing. The tech-heavy index was favored by investors on Friday. It hit both a record close and an all-time high, before closing at the very highest point of the session.

Russell 2000 Futures suffered the biggest hit at the open, 1.64% below Friday’s closing price, and extended the selloff to as much as 2.49%. Even after trimming losses, the small-cap benchmark is 1.98% down at the time of writing.

This lag should be noteworthy for two reasons:

1. If trade risk is currently driving the market, stocks of small-cap companies should outperform, as their growth would be unaffected by tariff jitters.
2. This morning's stronger dollar, due to its safe-haven status, should also favor domestic firms over multinationals.

Therefore, we consider the small-cap selloff as mere profit taking, which in turn positions the index as the best candidate for a potential buying dip. Technically, small-cap futures posted the most bullish hammer among U.S. futures contracts, with a lower shadow, five times longer than the real body—a lengthy line with which to reel in a short squeeze.

Meanwhile, shares in Europe dropped hard, with the STOXX 600 tumbling 1.33% after opening 0.34% lower—thereby wiping out more than a month of solid gains within the first five minutes of trading.

In the earlier Asian session, China’s Shanghai Composite (-5.58%) led the region in a free-fall to slip 6.6% lower, hitting the lowest closing price since Feb. 22.

The yuan sold off, with the greenback completing a triple bottom against it. Japan’s Nikkei 225 (-0.22%) and South Korea’s KOSPI (-0.74%) may have avoided the heavier selloff, but traders expressed their angst in the futures market, dragging futures contracts on the former index 2.25% lower. China's state funds intervened to ease the selloff—it should be noted, however, that government interference has yielded mixed results in the past.

At the same time, the yen strengthened as much as 0.73% against an ascending dollar, thanks to its own safe haven status, and settled 0.32% higher, for now. Technically, another full percentage point drop would complete a double top.

Gold opened 0.28% higher, which is a rare event in itself, and extended the advance to 0.4% even against a rising dollar—also rare. However, technically, the price climb found resistance by both the neckline of a H&S top and the top of a bearish pennant. Perhaps the outlook for a strengthening USD is restraining gains for the yellow metal.

Conversely, Bitcoin slid for the second session, by over 2%, amid a court order against, Craig Wright, who claims to be Satoshi Nakamoto, the founder of the world's most popular alt coin. The court order requires him to reveal his Bitcoin ownership records. Technically, the cryptocurrency may have found resistance by the $6000 levels—the 2018 lows.

West Texas Intermediate oil futures plunged as much as 3.1% in the early session, as gloomy trade headwinds added to Saudi Arabia's move to cut June pricing for all crude grades to the U.S., in a move that appeared to be aimed at easing concern over tighter global supplies. Technically, the price completed a downward-sloping H&S top and then found support by the 200 DMA, which was just crossed over by the 50 DMA, triggering a golden cross.

Up Ahead

• Chinese Vice Premier Liu He is scheduled to return to Washington for trade talks on Wednesday, though the diplomatic trip is now in question.
• The Reserve Bank of Australia meets to set interest rates on Tuesday, while New Zealand's central bank meets on Wednesday.
• China releases trade data on Wednesday, while U.S. figures follow suit on Thursday.
• South Africa holds national elections on Wednesday.
• China reports on inflation on Thursday. The U.S. releases April CPI data on Friday.
• On Friday the Office of National Statistics releases its UK monthly and Q1 GDP growth figures.

Market Moves

• The Stoxx Europe 600 Index dropped 1.3% on the largest tumble in 12 weeks.
• The Shanghai Composite Index sank 5.6% and the largest fall in more than three years.
• Hong Kong’s Hang Seng Index tumbled 3.3% on the biggest drop in almost seven months.

Currencies

• The Dollar Index gained 0.1%, the largest rise in more than a week.
• The Japanese yen advanced 0.4% to 110.65 per dollar on the biggest gain in more than a week.
• The euro fell 0.1% to $1.1193.
• The British pound dropped 0.4% to $1.3125, the biggest dip in more than two weeks.

Bonds

• Germany’s 10-year yield fell three basis points to -0.01% on the largest drop in more than a week.
• France’s 10-year yield slid two basis points to 0.348% on the biggest drop in more than a week.
• Australia’s 10-year yield declined five basis points to 1.7395%.

Commodities

• Iron ore slipped 1% to $93.26 per metric ton, the first retreat in more than a week.
• The iShares S&P GSCI Commodity-Indexed (NYSE:GSG) dropped 1.7% on the largest tumble in more than two months.
• West Texas Intermediate crude fell 2.5% to $60.34 a barrel.