Stocks Slump, Treasuries Up as Trade Clouds Darken: Markets Wrap

Stocks Slump, Treasuries Up as Trade Clouds Darken: Markets Wrap”

On May 10, the South China Morning Post published a report, "Will China use its US$1.2 trillion of USA debt as firepower to fight the trade war?" speculating that China might have potential leverage against the USA after President Donald Trump levied 25 percent tariffs on a total of now $250 billion of Chinese goods. Futures on the S&P 500 Index dipped 0.1%. The way that works is not by dumping treasuries, but buying dollars and dumping their own currency in bulk (usually with a horde of foreign exchange reserves), and using the dollars to purchase treasuries.

Stocks Mixed as Trade Angst Lingers; Yuan Steadies: Markets Wrap More (Bloomberg) - Asian stocks were mixed Wednesday as a rebound in USA equities failed to lift sentiment that remains fragile after the trade war escalated. "And you're also seeing President Trump confirmed a meeting with President Xi during next month's G-20 summit, which provides some optimism that despite the increase in tariffs, negotiations are still ongoing".

Trade rattled financial markets again, with stocks sinking for the fifth time in six sessions since China's defiance of Trump's warning not to retaliate for his imposition of higher tariffs Friday escalated the skirmish, driving demand for havens from gold to the yen while punishing risk assets. This makes the country's exports to the US cheaper, and helps boost global market share. The president also ordered tariffs to be raised on all remaining USA imports from China, which are valued at around $300 billion.

Elsewhere, European shares dropped more than 1% after the European Union said it was finalizing a list of USA goods to target in the event Trump imposes levies on vehicle imports.

Asian markets however sank further following hefty losses on Wall Street, following China's hike in tariffs on $60 billion of United States imports. "But it shows the overall deterioration in negotiations", he said about the renewed market chatter about China selling Treasuries as a trade weapon.

Earnings this week include Alibaba, Tencent, Cisco, Nvidia.

Kansas City Fed President Esther George and Richmond Fed President Thomas Barkin make appearances.

The People's Bank of China, on Tuesday, held their central parity rate of RMB, essentially yuan reference rate at 6.8365 to the dollar.

Nevertheless, the next direction of spot USDCNH may be dictated by upcoming Chinese economic data such as industrial production, retail sales, property investment and the jobless rate which are all expected to be released Wednesday at 2:00 GMT.

Australian unemployment is out on Thursday.

The MSCI Asia Pacific Index sank 0.7 per cent. Currencies The yen was at 109.63 per dollar after falling 0.3%. West Texas crude rose above US$61 a barrel.

The euro bought $1.1203, little changed.

Japan's Topix index dropped 0.7 per cent as of 9.05am in Tokyo.

The MSCI Emerging Market Index decreased 0.3%, the lowest in 16 weeks. The benchmark 10-year Treasury yields 2.41%, compared with 2.68% at the end of December.

Gold increased 1% to $1,300.10 an ounce.

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