News & Analysis

Overnight on Wall Street: Tuesday 06/08/19

August 6, 2019

By Deepta Bolaky
@DeeptaGOMarkets

Equity Markets

Monday was all about a dreadful combination of fears of a trade and currency war. The Yuan sank to its lowest level in more than a decade, and there was news that China had asked state purchasers to halt the import of American agricultural products.

It was a global sell-off across the board with major equities indices falling by about 2% or more:

US sharemarket: Dow Jones Average Industrial -2.9%, S&P 500 -3%, and Nasdaq -3.5%.

European sharemarket: Stoxx 50 -1.9%, FTSE -2.5%, CAC, -2.2%, and DAX -1.8%.

The significant breach below the symbolic level of 7 to the US dollar might have sent signals that China could be weaponising its currency, which rattled the markets. The US President has not hesitated to reiterate China as a “currency manipulator”, and investors will probably remain on the sidelines awaiting for the next moves from the US.

“China dropped the price of their currency to an almost historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

Currency Markets

Risk markets sold off, and investors are rushing into safe-havens. In the currency markets, major currencies were mixed against the US dollar.

Source: Bloomberg Terminal

The Aussie dollar was the worst performer dragged by the trade tensions between the US and China. The local currency is currently trading at 67.65 US cents ahead of today’s key events:

Exports, Imports and Trade Balance
RBA Rate Statement and RBA Interest Rate Decision

The Yuan’s move is pulling down other Asian currencies while the Japanese Yen are bolstering higher on haven flows.

Source: Bloomberg Terminal

Commodities

Commodities markets were also feeling the downward pressure amid the global sell-off. WTI and Brent Crude dropped further due to the market angst. It is unclear if China has already retaliated with its currency or whether more retaliation is expected. On the US side, investors are pulling from riskier assets awaiting for a response from President Trump.

As of writing, WTI and Brent Crude is currently trading at $54.03 and $59.91.

UKOUSD and USOUSD (Daily Chart)

Source: GO MT4

The rout in the equities markets and heightened tensions have sent the yellow metal on a rally. The bulls are in control, and the XAUUSD pair is currently trading at $1,473, high levels seen in 2013.

Source: Bloomberg Terminal

Cryptocurrencies

Unlike the stock and commodities markets, cryptocurrencies are pushing higher in a risk-off environment. It appears that the impact of the Yuan devaluation might have moved the digital assets. Are cryptos turning towards the Safe-Haven status?

Bitcoin surged breaking the $11,000 mark. As of writing, it is currently trading at $11,791.

BTCUSD (Daily Chart)

Source: GO MT4

Key Upcoming Events Ahead

Participation Rate, Employment Change, Labour Cost Index (New Zealand)
BRC Like-For-Like Retail Sales (UK)
Overall Household Spending, and Leading Economic Index (Japan)
Trade Balance, Exports, RBA Interest Rate Decision, and Rate Statement (Australia)
RBNZ Inflation Expectations, and GDT Price Index (New Zealand)
Factory Orders (Germany)
Fed’s Bullard speech (US)

Wednesday, 06 August 2019 Indicative Index Dividends ^{Dividends are in Points}
ASX200	WS30	US500	US2000	NDX100	CAC40	STOXX50
0	0	0.08	0.072	0.406	0	0
ESP35	ITA40	FTSE100	DAX30	HK50	JP225	INDIA50
0	0	0	0	0	0	0

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