US Stocks Fall on Chinese Moves – S&P Down 0.6%
US stocks fell in trading yesterday as the trade war between the US and China escalated. The Dow Jones dropped by 0.54%, the Nasdaq by 0.62%, and the S&P ended its record-breaking run to close down 0.64%. Treasury yields moved higher as traders awaited upcoming inflation data, with the 2-year yield rising by 1.6 basis points to 4.120% and the 10-year yield gaining 4 basis points to 4.193%. The dollar strengthened amid choppy trading, with the DXY rising by 0.2% to 106.20. Oil prices increased on the back of proposed Chinese stimulus, with Brent up 1.14% to $71.92 and WTI up 1.38% to $68.13. Gold also rallied, breaking out of recent ranges to close 0.96% higher at $2,658.63 by the New York close.
Trade War Heats Up Markets
With over a month remaining before Donald Trump assumes office, the anticipated trade war between the US and China is already intensifying. Chinese stocks and bonds rallied yesterday following an announcement by the Chinese government indicating changes in monetary policy and additional market stimulus. China also retaliated against the US by cutting drone supplies to the US and Europe, a move impacting Ukraine’s defence, and by opening an investigation into chip giant Nvidia. Investor concerns regarding global economic growth are rising as these developments unfold before Trump’s administration even takes office. Traders now anticipate increased market volatility as the situation evolves.
Central Banks in Focus for Traders Today
It is a relatively quiet day on the macroeconomic calendar, although the Reserve Bank of Australia will make its latest interest rate decision during the Asian session. The bank is widely expected to keep rates on hold at 4.35%. However, traders will closely monitor the statement and press conference as the RBA addresses inflation concerns and slowing growth. There is little else on the calendar for the rest of the trading day, but traders expect continued volatility driven by geopolitical updates, which are arriving on a near-daily basis. Oil markets will also be watching for any fresh updates from the ongoing OPEC conference.
