US Stocks Smashed Again as Trade War Escalates – Nasdaq Down 2%
US stock markets took another beating yesterday as the global trade war continued to escalate in light of recent tariff moves. The three major indices had initially rallied in early trading, but a threat to increase Chinese tariffs to 104% by President Trump, starting shortly after midnight, put an end to that. The Dow closed down 0.84%, the S&P down 1.57%, with the Nasdaq again taking the brunt of the move, closing 2.15% in the red. US Treasury yields had a mixed day, the 2-year down 3.8 basis points at 3.725%, while the longer dates rallied, the benchmark 10-year up 10.9 basis points at 4.293% at the close. FX remained volatile, the DXY down 0.44% on the day but was mixed against the majors. Oil prices were hit again, Brent down 2.66% at $61.55 a barrel and WTI down 4.12% to $58.20 a barrel. Gold closed close to flat, down just 0.02% on the day at $2,981.49, but had seen a $60 range over the course of the day.
Oil Prices Continue to Decline
Oil prices have been absolutely smashed over the last week’s trading, as a global trade war has led to huge demand concerns for ‘black gold’ at the same time as OPEC+ announced production increases four times larger than expected. The combination of the two has created the perfect storm for oil bears and, if you add into the mix the potential for changes to Russian and Iranian sanctions, this could be just the start of the move. Both Brent and WTI are now sitting at levels not seen since 2021, and further moves lower open the way for a move to much lower levels. There is no doubt that we will see further volatility in the coming days and weeks from geopolitical updates, but unless we see a huge change in direction with regards to both the supply and demand side, then expect oil to move further south.
Event Calendar Picks Up Today
The macroeconomic calendar kicks into action for the first time this week today with a strong focus on central banks, and traders are expecting even more volatility as they cannot fail to mention recent developments with regard to global trade. The initial focus in the Asian session will be on New Zealand today, with the Reserve Bank of New Zealand expected to cut rates by 25 basis points. The focus will then move north to Japan, with Bank of Japan Governor Kazuo Ueda scheduled to speak in the afternoon session. Once again, there is nothing of note on the cards in the European session, and the focus is expected to be on trade updates again, which should continue into the New York open. However, later in the US day, trader attention will move back to central banks when the Fed’s recent meeting minutes are released.
