Market sentiment has taken a sizeable jolt following the move from President Trump to increase tariffs on Chinese imports. Whilst this move increases trade tensions between the world’s two largest economies, there is still a feeling that open dialogue could yet still solve the issue. However, with talks in recent days not able to break any deadlock, it seems that the US/China trade dispute will now drag on for weeks and perhaps months. It is likely that the two leaders, Trump and Xi, will meet at the G20 summit, but that is not until the end of June. So, markets will likely be left in limbo for the coming weeks. Positive risk sentiment that had built in the early months of 2019 is now questionable. Safe havens have benefitted from all of this. Treasury yields have fallen, whilst the yen and Swissy have been the main winners in the forex space. The dollar had initially slipped on the shock, however, in the past couple of sessions has begun to build support again. The key volatility is being seen still in equity markets. Wall Street bounced back on Friday but futures are not looking so rosy today. There looks to be a rather risk negative sentiment reflected through forex markets too. As traders had been steadily pricing in a resolution to the trade dispute previously, the positivity is seeping away. Looking on Aussie/Yen, a gauge of risk appetite and our chart of the day, it seems that this move is yet to completely play out.
Wall Street bounced strongly into the close to end Friday with the S&P 500 +0.4% higher at 2881. However, US futures are lower today by -1.1% and this is dragging Asian markets lower. The Nikkei is -0.8% and