EU Daily Market Wrap - 13th May 2019

EU Daily Market Wrap - 13th May 2019

Today's Highlights

China retaliates raising tariffs on US goods;

EU ready to impose tariffs on $23 bln US goods;

Macro Review

China announces 25% tariffs on 2493 US products starting from 1st June. The news comes after Trump warning that "China should not retaliate or it will only get worse". Global shares plunged in the early our of trading amid risk-off tone. The reaction in other asset classes was mixed as the USD safe heaven trade lost steam with some of the analyst in the street suggesting that this new round of tariffs will be a net negative for US assets. The other main story today regarded US Treasuries, as with China being one of the biggest buyers of US debt, their new retaliation strategy could create a demand shortage for US debt. However, US T-Bills were up today amid risk-off tone. The trade war is escalating and it could create further volatility in Global Stocks. However, as already experienced in the past, I'd be careful as things could change very quickly.

US Equities head into their worst decline in five months as Trade War escalates with China raising tariffs and the EU ready to retaliate on $23 bln of US goods. SP500 dropped to 2810 after a choppy US open. US shares remained under pressure, however still showing sign of resilience with major rebounds happening later in the session. The rest of European Indices followed similar patterns.

The FX space traded mixed with the USD Index firm above the 97 level. The initial reaction after the headline, sparked immediate USD weakness with EUR jumping around its weekly highs. However, the rest of the dollar counterparts suffered major losses, with AUD being the biggest under-performer and GBP retesting the 1.2980 level to the downside. 

Crude Oil dropped back to 61 after an initial move higher, with the initial move supported by the fact that recent Chinese tariffs excluded US Oil and the subsequent pullback justified by risk-off sentiment and the some analyst suggesting a downgrade in Chinese GDP after the tariffs.

Gold popped higher touching the 1300 level amid risk-off tone and mild USD weakness.

The Day Ahead

  • NAB Business Confidence (overnight);

  • UK Jobs Data (9.30 am);

  • GE ZEW Current Economic Conditions (10.00 am)

EU Close

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Hope you enjoyed the session.

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