Financial markets have opened in Asian back under pressure as the trade war between the US and China escalated further over the weekend. The situation had looked more promising on Friday as negotiations continued and stocks and risk trades experienced a bit of a relief rally, however news over the weekend indicated a significant escalation of tensions as China said that the US must remove all extra tariffs and President Trump called for China to ‘act now’ on a trade deal. Equity futures are pointing lower and risk currencies including the Aud, UsdJpy and Jpy crosses are already under pressure despite not experienced the gapping that we saw last Monday. Commodities are relatively stable but Oil traders will be keeping a close eye on developments in the Persian gulf as the week rolls on, WTI trading at $61.4/b and Brent at $70.5/b.
The escalating trade war between China and the US looks set to dominate investor focus for the week ahead again and early indications are that both sides are digging in for a longer struggle. It was only just over five trading days ago that things were looking much more rosy on the issue and some investors will be hoping that we could see any equally swift turn around in sentiment, but if we don’t see signs of this happening soon then we will probably have seen a top in the recent stock market bull run. As tensions increase expect risk assets to come under more pressure as longer term investors react to recent developments and re-evaluate positioning with a view to further reductions in global growth.
Looking ahead to todays sessions and the economic calendars are relatively quiet in terms of fundamental data releases. We are set to hear from a couple of major central bankers in the form of the RBA Assistance Governor Guy DeBelle and Fed Vice Chair Richard Clarida but aside from those events, expect markets to trade in line with sentiment and any further updates on trade.