Stocks Hit as Trade War Fears Escalate – Dow Down 1%
US stocks fell in trading yesterday as investors continued to assess President Trump’s latest tariff updates and the possibility of a global trade war. The Dow Jones closed down 1.01%, while the tech indices suffered slightly less, with the S&P down 0.43% and the Nasdaq down 0.47%. Treasury yields were quieter, with the 2-year up just 0.3 basis points to 2.270% and the 10-year down 2.7 basis points to 4.505%. The dollar took a significant hit, mainly against the yen, as haven flows into the Japanese currency increased, with the DXY down 0.68% on the day to 107.11. Oil prices moved higher again as supply concerns intensified, with Brent up 0.78% to $76.63 and WTI up 0.53% to $72.48. Haven flows also pushed gold to yet another new high before it fell later in the day, ultimately closing up 0.1% at $2,936.48 an ounce.
Haven Flows Dominate Market Moves
There was greater consistency across the board yesterday, with haven flows dominating market movements as concerns grew that President Trump is focused on initiating a full-scale global trade war. Gold has been a significant mover ever since the ‘red sweep’ that brought Trump to power back in November, but stocks have remained resilient in the face of market uncertainty. However, recent movements in gold and the yen have led traders to question whether we are returning to a classic ‘risk-off’ / ‘risk-on’ trading environment. If this is the case, global stocks could face an extremely turbulent period in the months ahead. Adding to the concerns for equity market participants is the lofty valuation levels at which their assets are trading, which could accelerate the pace of market corrections.
Big Calendar Day Ahead to Close Out the Trading Week
It is a packed calendar for traders today, with key data updates and geopolitical risks spanning all three trading sessions. The Asian session includes key updates from the RBA’s Michele Bullock and President Trump before data releases ramp up later in the day. Flash Services and Manufacturing PMI data will be released across multiple markets, including France, Germany, the UK, the EU, and the US. Additionally, retail sales updates from the UK and Canada will be published during their respective sessions. The calendar concludes later in the day with US existing home sales figures and revised updates for the University of Michigan’s Consumer Sentiment and Inflation Expectations data.
