Financial market research and analysis

Traders are faced with a sea of red in risk-off trading as markets are set to open on Tuesday. Despite the fact the market has been expecting an escalation in trade tensions between the world’s two largest economies with further tariffs from Trump; the reality of those tariffs, 10% on a further $200 billion worth of Chinese imports, hit sentiment sending markets across Asia southwards overnight with the exception of the Japanese Nikkei, whilst also dragging European futures and US futures into negative territory.

The 3 major indices on Wall Street traded lower overnight, with the tech-heavy Nasdaq experiencing the biggest sell-off since July as investors awaited nervously for Trump’s tariffs. Apple and Amazon fell 2.6% and 3.2% respectively, their biggest declines since April.

Chinese unlikely to continues trade talks

Whilst Trump spared Apple watches and certain consumer products, he was also clear that any retaliation from China will be met with tariffs on a further $267 billion worth of Chinese imports. This latest move by Trump is unlikely to be taken lying down by the Chinese, even if it is slightly lower than the initial 25% tariff expected; the Chinese won’t consider this a concession and it could encourage them to leave the negotiating table altogether. Considering this latest action and comments from Trump it is difficult to see how this sharply escalating trade spat is going to be resolved. Certainly, any resolution before the midterm elections looks highly unlikely.

Oil lower on trade tensions

This latest move by Trump will reignite global growth concerns, with copper, often regarded as a barometer for global growth, falling lower for a third straight session. Oil prices also took a hit in early trade on Tuesday as the latest developments in the US-Sino trade war cloud the demand outlook, although concerns over tightening supply are capping losses. Whilst the growing trade dispute is expected to hit global growth, impacting demand for oil, the upcoming US sanctions on Iran will see a tightening of supply, preventing the price of oil from freefalling. Iranian crude exports have already declined by 580,000 barrels per day over the last three months.

Dollar Recovers vs Yen & Pound steady at $1.3150

In the currency markets, risk off sentiment dominated overnight with the safe haven yen initially rallying strongly versus the dollar, before giving up those gains as the dollar continues to claw back earlier losses.

The pound has managed to hold onto gains from the previous session, with investors shrugging off a stark warning from the IMF over a disorderly Brexit. With little in the way of economic data to drive trading, Brexit developments will remain key for pound traders prior to Wednesday’s inflation reading.

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