Global Stock Markets Plummet on Fresh Trump Threats

1. Global Stock Markets Plummet on Fresh Trump Threats

Mainland Chinese shares declined on Monday amid uncertainty on the U.S.-China trade front. The US more than doubled tariffs on $200bn of Chinese goods on Friday, in a sharp escalation of the Sino/US trade war. Donald Trump kept firing against China via Twitter over the weekend, which has kept the risk sentiment clearly in the risk-off arena. China is reacting quite moderately to Trump’s threats thus far, trying to play this out over time, as it waits for a possibly a different president down the road, to which Donald Trump responded he would be giving China a much worse deal in his second term, while now also going to increase tariffs on the rest of $325 bln worth of Chinese goods.*

2. EU Stock Markets Open Lower

Unsurprisingly, EU markets opened lower this morning as investors monitored the latest US-China trade developments. It is also important to note that, President Trump has stated that he is also considering to add tariffs on EU cars by the end of this tariff round. His statements have pushed EU auto shares lower. Risk off could continue to set today’s bearish market tone with Dow futures pointing to more than 200-point decline at Monday’s open.**

3. Forex Preview: USD/JPY Breaks Below Key Support

The USD/JPY plummeted below its key 110 support this morning as investors turned to the safe-haven yen. The USD is trading mostly stable against other key rivals with the EUR gaining very little over the USD but overall the common currency is not a strong mover at the moment.***

4. Oil Edges Higher, Gold Fails to Recover

Oil markets noted moderate gains today on increasing concerns about supply disruptions in the crucial producing region of the Middle East. Saudi Arabia said on Monday that two of its oil tankers had been sabotaged while off the coast of the United Arab Emirates, the attacks were described as posing a threat to the security of global oil supplies. The incident has caused tensions to rise between the US and Iran, following the deployment of a growing number of United States military assets to the Middle East. These developments also add to the risk-off outlook. Oil prices could be dragged down later in the day however amid stronger and stronger developing risk-off flows.*

5. Gold Fails to Recover, BTC Breaks Above $7K

Elsewhere, spot gold has not yet been able to break decisively higher but does appear to have a good chance to do so if tensions persist. Elsewhere, BTC saw a stellar rally over the weekend rising above the $7K key level and could play out as a safe haven while the world is caught up in these worrying developments all around.  

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Sources:

*CNBC May 13, 2019 2:48 AM ET
**Reuters May 13, 2019 3:53 AM ET
***FXStreet May 13, 2019 03:07 AM ET
***Bloomberg May 13, 2019 06:13 AM ET