Equities Decline on Trade Tension Escalation, Trade Talk Proceedings in Focus

trade tension
Trump to delist Chinese firms

The news of Chinese stocks delisting in the US exchange influenced caution in the global market. German growth outlook reduced, and traders await fresh updates from the US. 

Summary: Global stock market is off to a dovish start for the week as trade tensions escalated following update from the US last Friday hinting at drastic measures to make China submit to its demand. Trump hinted at possible delisting of Chinese firms from US exchanges and further drastic measures planned unless China agrees to US terms. However, its impact was decreased a bit following clarification from US treasury officials that they don’t plan on stopping Chinese firms from being listed in US exchanges. However, with trade talks between the two nations expected soon, traders are on a cautious mood awaiting further headlines and proceedings before placing any major bets.

Following cues from the Asian market and updates from the USA, the European market opened on a dovish note. Its loss was further aggravated on declines stemming from oil sector shares as news of the resignation of BP CEO Bob Dudley hit the market. But better than expected retail activity helped reign in losses post which the European market is seeing mixed activity. Amid escalating trade war woes and divided investor risk appetite, the forex market is seeing mixed activity today. 

Precious Metals: Rare metals are seeing muted activity today with some level of bearish bias. The dovish influence on rare metals market despite escalating trade war woes stems from the fact that cautious investor sentiment boosted USD in the global market considerably. 

Crude Oil: Crude oil price declined in the global market with both international benchmarks seeing considerable loss as escalating trade war woes affected crude oil demand and consumption outlook. Further, the bleak Chinese economic outlook also weighed down Crude oil bulls today. 

USD/JPY: The pair traded in red earlier in the day as escalating trade war woes and caution in the global market favoured USD. But USD grew strong on broad-based risk asset sell-off in global market offsetting pressure from JPY. The pair is now trading range-bound near the $108 handle. 

On The Lookout: The week ahead is set to see reduced liquidity in the global financial market given the fact that Chinese financial markets are closed on account of National Day celebrations for nearly 7 days. However, trade talks between China and US are set to resume once the holiday celebrations are over and Chinese Vice Premier Liu He is expected to fly to the US for high-level trade talks with the US ahead of which traders hope the US will hold back from taking drastic measures as a token of goodwill.

On Brexit front, odds of no-deal Brexit continues to rise with each passing day as PM Boris Johnson seems intent on going through with Brexit as per the current deadline. 

Trading Perspective: On account of escalating trade talk related tension and resulting cautious investor sentiment, USD is trading strong in the global market causing major global currencies to decline sharply. Despite escalating trade talk related tension, gains in Apple, Microsoft and several other tech sector shares in the international market ahead of Wall Street opening helped the US stock and index futures trading in international market see positive price action which suggests Wall Street is set to see a positive opening for the week.

EUR/USD: The pair is trading in red today as EURO bulls were weighed down by worse than expected macro data outcome in EU area macro data and reduction of German growth forecast and outlook by several leading financial service providers. Firm USD also added pressure to EURO bulls. Traders now await US headlines and macro data for short term profit opportunities. 

GBP/USD: The pair is trading positive as UK GDP outcome was better than expected despite ongoing uncertainties surrounding Brexit. GBP bulls are also supported by the fact that PM Boris Johnson faces sexual misconduct allegations which prevent him from working full-fledged on Brexit. Traders now await US headlines and macro data for short term profit opportunities. 

USD/CAD: The pair is trading positive in the global market as broad-based risk-off assets and major global currencies sell-off on account of trade talk tension escalation pressured CAD bulls. Further, the decline in crude oil price in the global market also weighed down the commodity-linked currency Canadian Loonie. Traders now await US headlines and macro data for short term profit opportunities.