Following the selloff in US stocks overnight, Asian markets opened generally lower today but losses are so far limited. China Shanghai SSE hit as low as 2872.83 but quickly pared losses to 2893.35, down only -0.36%. Yuan also recovers mildly with USD/CNH back below 6.9 handle at 6.895, down from yesterday’s high at 6.9189.
The current round of US-China trade war is settled there with news US tariffs effect last Friday and Chinese retaliation ready for June 1. Next to come are tariffs on essentially all other Chinese imports, with public hearing on June 17 at USTR. For today, focus will turn to UK job data and German ZEW first.
Overnight, DOW dropped to as low as 25222.51 but ended just down -2.38% or -617.38 pts at 25324.99. S&P 500 lost -2.41% while NASDAQ suffered more and dropped -3.41%. What’s more serious is treasury yields. 10-year yield dropped to as low as 2.389 then closed down -0.050 at 2.405. 3-month yield closed at 2.395. Thus, 3-month-10-year curve is technically not inverted.
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In the currency markets, New Zealand Dollar, Euro and Australian Dollar are the strongest one for today so far, recovering. Yen and Swiss Franc are weakest, digesting this week’s rally. For the week, Swiss Franc and Yen are the strongest without a doubt, followed by Euro. Aussie and Loonie are the worst, followed by Sterling.
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Into US session: EUR dives on German yield free fall, but AUD still the weakest
Entering into US session, Yen is back as the star performer, followed by Swiss Franc. This time, weaker than expected economic data were largely shrugged off by stocks and bond investors. Instead, renewed worry over Italy’s fiscal health boosted Italian yield up. German 10-year yield, on other hand, is in free fall on safe haven flow, breaking -0.11 handle. US 10-year yield also dives through 2.38 handle at the time of writing. Both developments help lift Yen and Swiss Franc, Dollar follows as third strongest for now.
Australian Dollar is staying as the weakest one for today, followed by New Zealand Dollar. These two are probably the only ones who care about resumption of slowdown in China. Situation could only get worse with more tariffs ahead. Euro is currently the third weakest for today. US retail sales and Canada CPI will be the next triggers for volatility.
Technically, EUR/JPY and GBP/JPY resume recent decline by breaking through 122.48 and 141.20 temporary lows. EUR/USD will likely take on 1.1173 minor support. Break will raise the chance of down trend resumption and target 1.1111 low next.
In Europe, currently:
Earlier in Asia: