Bonds, Yen, Gold in Demand on U.S Trade Threats

Singapore (May 9)  The Sino-U.S trade war escalation remained front and center in capital markets overnight.

Global equities along with U.S stock futures continue to face pressure with time running out for U.S tariffs to escalate between the world’s two largest economies. Safe haven trading dominates proceedings with yen, gold and sovereign debt climbing as investors continue to seek sanctuary.

President Trump insists that China “broke the deal” and “will be paying for it.” His threat has many stock investors paying for it also. A ‘no broker’ trade deal has the potential to see equities give up another -10 to -20%. His comments overnight came ahead of the Chinese delegation’s arrival stateside today for ‘the’ final round of bilateral trade negotiations. China is expected to retaliate should the U.S push ahead with their tariff threats.

Elsewhere, Iran has set a two-month deadline for Europe to throw the country an economic lifeline amid U.S sanctions, otherwise it will abandon limits on uranium enrichment.

While in the U.K, PM Theresa has won a reprieve from her own Conservative Party, which has kept the rules on challenging for the leadership unchanged. In other words, Ms. May remains in place until Brexit is delivered.

On tap: The U.S. releases trade and producer-prices data this morning, along with Canada’s trade numbers (08:30 am EDT). Uber’s initial public offering is expected to price after trading closes in the U.S today.

1. Stocks sea of red

Asian equities fell to a two-month low overnight as investors wait to see whether Chinese and U.S trade negotiators are able to save an eleventh-hour trade deal in Washington this week.

In Japan, the Nikkei fell for a fourth consecutive session to end at its lowest level in six-weeks as investor caution dominates ahead of the talks stateside. The Nikkei share average dropped -0.93% Thursday. The benchmark index has lost -4.3% after hitting a 2019 high in the last week of April. The broader Topix lost -1.38%. All but two of its 33 subsectors finished in negative territory.

Down-under, Aussie stocks bucked the trend in Asia trading as Federal regulator’s moved to block a merger between the country’s third and fourth-largest telecommunications companies. The ASX 200 closed up +0.4% following six-drops in the prior eight trading days. Energy jumped +1.3% after the overnight rebound in oil prices while utilities jumped 2%. But materials lost -0.3%. In S. Korea, the Kospi index fell -2%.

In China and Hong Kong, major stock indexes closed at 11-week lows on Sino-U.S trade tensions. President Trump has vowed not to back down on his threat to increase tariffs by the end of the week in a no deal scenario. The blue-chip CSI300 index fell -1.9%, while the Shanghai Composite Index declined -1.5%. In Hong Kong, at the close of trade, the Hang Seng index was down -2.39%, its lowest close since March 8. The drop brought losses for the index to -5.9% for the week, while the Hang Seng China Enterprises index fell -2.27%.

In Europe, regional bourses trade lower across the board tracking lower Asian Indices and lower U.S Index futures as trade tensions and Brexit talks continue to weigh on markets.

U.S stocks are set to open in the ‘red’ (-0.78%).


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