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Top 5 Things To Know In The Market On Monday

Published 02/07/2018, 10:37
Updated 02/07/2018, 10:56
© Reuters.  Top 5 things to know today in financial markets

© Reuters. Top 5 things to know today in financial markets

Investing.com - Here are the top five things you need to know in financial markets on Monday, July 2:

1. U.S.-Europe Trade Tension Escalates

The European Union has threatened to impose new retaliatory tariffs worth $300 billion, if the U.S. moves forward with tariffs on European cars.

President Donald Trump, who has repeatedly criticized the EU over its trade surplus with the U.S. and for having higher import duties on cars, said last week that the government was completing its study and suggested the U.S. would take action soon.

The latest development in the brewing global trade war comes only days ahead of a U.S. move to impose $34 billion of tariffs on Chinese exports on Friday. Beijing is expected to respond with tariffs of its own on U.S. goods.

2. Dow Futures Drop More Than 100 Points

The trading week was set to kick off on a downbeat note on Wall Street, with U.S. stock futures pointing to sharp losses at the open, as worries over a brewing trade war between the U.S. and its major trading partners kept buyers on the sidelines.

At 5:35AM ET, the blue-chip Dow futures were down 155 points, or around 0.6%, the S&P 500 futures slumped 16 points, or 0.6%, while the tech-heavy Nasdaq 100 futures indicated a loss of 50 points, or roughly 0.7%.

There are no major earnings scheduled for today.

Elsewhere, European markets were under pressure, as automakers and miners, seen among the sectors most at risk of a trade war, led losses. Among national indexes, Germany's DAX index slumped as concerns about Chancellor Angela Merkel's coalition weighed on sentiment.

Earlier, Chinese markets led losses in Asia, with major markets in the region closing sharply lower. The Shanghai Composite tumbled 2.5% and fell further into a bear market, while the yuan, fresh off its worst month on record, continued to lose ground against the dollar.

3. Dollar In Demand As Euro Slides

Away from equities, the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was 0.3% higher at 94.50.

Demand for the dollar continued to be underpinned by the relative strength of the U.S. economy and the prospects of additional rate hikes by the Federal Reserve this year.

Against the safe-haven yen, the greenback was little changed at 110.80, pulling back after hitting a six-week high of 111.06 overnight.

In the bond market, the U.S. 10-year Treasury yield dipped slightly to around 2.83%.

On the data front, today's calendar features the ISM's manufacturing survey for June, as well as a report on construction spending for May, both due at 10AM ET.

Meanwhile, the euro came under pressure after Germany's interior minister offered to resign amid an escalating row over immigration policy, throwing into doubt the future of Chancellor Angela Merkel’s coalition government.

Elsewhere, Mexico's peso gained after leftist candidate Andres Manuel Lopez Obrador won Mexico's presidential election on Sunday with a big margin that may herald a congressional majority.

4. Oil Falls After Trump Tweets Hints At Higher Saudi Output

Oil prices slumped after U.S. President Donald Trump surprised traders by announcing an impromptu agreement with Saudi Arabia to add more supply to increasingly tight oil markets.

In an early morning tweet on Saturday, Trump said Saudi Arabia's King Salman had agreed to his request to increase crude production “maybe up to" 2 million barrels to help offset a decline in supply from Iran and Venezuela.

International benchmark Brent futures were recently down 75 cents, or roughly 1%, at $78.48 a barrel, while U.S. crude futures on the New York Mercantile Exchange were down 37 cents, or 0.5%, at $73.78.

5. Global Manufacturing PMIs Lose Momentum

Downbeat manufacturing activity readings from Europe and China further added to the risk-off mood, in a worrying sign the Trump administration's "America First" protectionist policies could derail global growth.

Euro zone factory growth slowed to an 18-month low in June, slipping for the sixth month in a row, a survey showed. New orders growth slid to its lowest in nearly two years, amid widespread concerns about trade barriers and their impact on overall economic activity.

In the UK, British factories kept up a steady pace of growth in June but worries about global trade and Brexit knocked confidence about the outlook to a seven-month low, according to survey data.

Elsewhere, growth in China's manufacturing sector cooled in June as firms faced rising input costs and a decline in export orders amid an escalating trade dispute with the U.S., a private survey showed. The survey revealed new export orders contracted for the third straight month and the most in two years.

Investors and traders are worried that threats of higher U.S. tariffs and retaliatory measures by others could derail a rare period of synchronized global growth.

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