Trump Shatters Global Stock Markets With New Tariff Threats

1. Trump Shatters Global Stock Markets With New Tariff Threats

New tweets threatening an increase tariffs on existing Chinese goods from 10% to 25% by Donald Trump sent volatility soaring Monday and spread a major risk off tone in the markets causing safe havens to soar. China reacted with a clear rejection of these measures taken by the POTUS and it is likely that the Chinese vice president Liu He will cancel his visit to the US this week, as China refuses to proceed with negotiations under Trump’s ultimatum. Trump’s tweets jolted markets which had enjoyed a healthy bull run in recent weeks by signs of progress in trade talks, better-than-expected corporate earnings and a neutral hold by the Federal Reserve.*

2. Safe Havens Rally

The dollar started the week on a slightly bullish tone as traders sought safe havens amid global concerns. The safe-haven yen also climbed while the yuan slid on Monday after U.S. President Donald Trump threatened to raise tariffs on China. The CNH already lost in value and may tumble significantly lower on a deliberate weakening of its currency by China to countermeasure Trump’s renewed tariff threats. The EUR/JPY hit its lowest since January around 123.33 yen, but later recovered somewhat to last trade at 123.90 as of 8:00 GMT.*

3. Key Interest Rate Decisions Ahead

Market participants will now look ahead to this week’s central bank meetings on Tuesday and Wednesday. Specifically, the RBA is expected to remain dovish with no major changes to its monetary outlook while the RBNZ is seen slashing key interest rates by 0.25%.***

4. Oil Tumbles, Gold Recovers

Oil prices tumbled by more than 2 percent on Monday as the risk-off mood intensified. Crude oil traded at its lowest for a month right at the 200-day moving average. If this level breaks as well, we may see a drop down to the $58s in WTI. Elsewhere, spot gold could be the overall winner of these developments if the US also attempts to deliberately keep its currency weaker in response to a possible retaliation by China and as the whole risk-off mood becomes more and more complicated. Presently however, gold still needs to trade above $1,290 first to really see a good chance of reclaiming the $1,300 level.****

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Sources:
*CNBC, May 6, 2019 2:48 AM ET
*Forbes, May 6, 2019 3:53 AM ET
***Reuters, May 6, 2019 03:07 AM ET
***Investing, May 6, 2019 6:07 AM ET

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