Dow off 575 points; Market turmoil deepens as trade war panic sets in
Where to start? Last week’s surprise announcement from President Donald Trump of new tariffs against China continues to panic markets. Just when it looked like relations were beginning to thaw again, we’re back where we started.
The trade war looks to have no end in sight. The new 10% tariffs on $300 billion of additional Chinese goods could be raised higher. It may even go above the 25% level imposed upon other imports. Beijing has already retaliated (even though the new tariffs don’t come into effect until September): the People’s Bank of China has let the yuan depreciate to its lowest levels in years.
Incredible losses for Dow: Equities hammered again as sell-off deepens
Two weeks ago the stock market seemed like a rosy place. Belief was that the Federal Reserve was about to start a sustained cutting cycle, and that US-Sino relations were on the mend.
Fast forward to today. The Dow is off a whopping 575 points, the SPX is recording 2.2% losses, the FTSE 100 is at a two-month low and the Dax is not far off the lows of April 1st. The ASX has plunged 2.8%, or 191 points, while the Hang Seng has been knocked for six, with losses of 3.8% or 1,000 points taking it down to lows not seen since January 8th.
Meanwhile, the VIX is up two points and challenging the highs of early May.
FX: Chinese Central bank braces for trade pain with yuan devaluation
The yuan is trading above 7 per dollar for the first time in over a decade today after the People’s Bank of China set the daily mid-point of its trading range at US$6.9225.
The dollar may be up against the yuan – and the commodity trio – but elsewhere it is sliding. EUR/USD has leapt 0.6% to trade around 1.1175, USD/JPY has dropped half a percent to trade just above 106, which makes it very likely it’ll be the lowest close of 2019 for the pairing. Meanwhile the greenback has dropped 0.8% against the Swiss franc to 97.50 – its lowest level since the end of June.
While Sterling is holding its ground against the dollar, elsewhere it has tumbled as well. A spokesperson for the European Commission has claimed that the current Brexit agreement is the ‘best deal possible’, denting hopes that Brussels will budge and open the way for more negotiations ahead of the October 31st deadline.
Gold surges as investors flee to safety, oil slides further
Gold is up 1.8%, adding around $25, to trend around $1,465 as markets dump risk and look for shelter in safe-haven assets. Silver has jumped 1.8%.
Meanwhile, crude oil has dropped 1.4% to trade below $54.50 and Brent is down 1.2% and trading around $60.60 after giving up support at $6.
Natural gas is taking an absolute hammering, off more than 5% and trading around $2.035 – not that far from the key psychological $2.00 handle.
Cryptocurrency: Sell off? What sell-off?
Things are much rosier in the cryptocurrency market today, with Bitcoin up 14% to test the $12,000 handle again. Litecoin is up 6.2% ahead of this week’s halving, Ethereum has gained nearly 5%, and Bitcoin Cash and Dash are both trading up 3.3% on today’s opening levels. Ripple is something of a straggler today, registering comparatively small gains of 1.5%.
Some view cryptocurrency as something of a safe-haven, with the equity sell-off prompting many to pile into cryptos.