Trade tension and protectionism remain the major theme in the financial markets. Following the selloff in US stocks, Asian indices are generally under pressure today. At the time of writing, Nikkei is trading down -0.52%, Hong Kong HSI is down -0.88%. China’s Shanghai composite extends recent steep slide and is down -0.81%. In the currency markets, Yen is trading as the strongest one today, followed by Euro. Commodity currencies are generally weak with Australian Dollar leader the way down. In other markets, WTI crude oil extends recent rebound and is back above 68. Gold had a brief stay above 1270 on yesterday’s recovery but is heading back to 1260 handle.
Technically, EUR/AUD’s break of 1.5773 support turned resistance put focus back to 1.6189 high. And with 1.5153 support defended, the medium term rise from 2017 low at 1.3624 is defended. Recoveries in EUR/USD and GBP/USD are still seen as corrective in nature even though they may extend in near term. EUR/JPY and GBP/JPY are also staying in tight range even though more downside is mildly in favor. 126.63 in EUR/JPY and 144.37 in GBP/JPY remain the levels to watch.
Navarro and Mnuchin sent conflicted messages on foreign investment curb
The US markets were confused by the mixed messages from Trump’s administration regarding investment restrictions on foreign companies. US Treasury Secretary Steven Mnuchin tweeted saying that the statement regarding foreign investment on tech companies “will be out not specific to China, but to all countries that are trying to steal our technology. DOW dropped nearly -500 pts after the message
But later White House trade adviser Peter Navarro tried to talked down the idea of restrictions on all foreign investments. He said “there’s no plans to impose investment restrictions on any countries that are interfering in any way with our country. This is not the plan.: Navarro added that “the whole idea that we’re putting investment restrictions on the world — please discount that.”
DOW pared pack some losses after reaching as low as 24084.39. It closed down -1.33% or -328.09 pts at 24252.80. S&P 500 lose -1.37% or -37.81pts to close at 2717.07. NASDAQ suffered the worst decline, losing -2.09% or -160.91 pts to 7532.01.
France FM Le Maire on trade war: we don’t want an escalation, but we are the ones being attacked
French Finance Minister Bruno Le Maire warned yesterday that “if the United States hits us again with a 20 percent increase on cars we will respond again..” And he emphasized that “we don’t want an escalation, but we are the ones being attacked.”
Harley Davidsons plans to move production of motorcycles shipped to EU from US to other international facilities to avoid the tariffs. Regarding that news, Le Maire said “whatever allows jobs to be created in Europe goes in the right direction. We don’t want a trade war, but we will defend ourselves.”
France, Germany and the UK have requested for exemptions from sanctions on their companies for doing businesses with Iran. Le Maire said there was no positive signs from the US. And “for the moment, our requests remain unanswered”.
On the data front
Japan corporate service price index rose 1.0% yoy in May, in line with expectation. UK will release BBA mortgage approvals and CBI reported sales. Later in the day, US will release S&P Case-Shiller house price and consumer confidence.