The Canadian dollar dropped 0.51 percent on Monday. The ongoing trade dispute between the US and China was the biggest factor behind the drop of the loonie. Oil prices had rallied after news of an attack on Saudi oil tankers, but in the end the downward pressure from lower demand estimates if the trade war becomes a reality took crude into negative territory.
The biggest concern for investors is that not reaching an agreement with China could jeopardize the chances of the USMCA as it awaits to be ratified. Hard negotiating tactics had the loonie scrambling before concessions were made in the last days of talks between the US, Mexico and Canada.
Job gains in Canada beat expectations but it was not enough if the trade deal with its largest trading partner is not ratified.
The US dollar is mixed after China announced its retaliation against rising US tariffs. Safe havens were higher against the greenback with the Japanese yen, Swiss franc and gold all appreciated as investors lost their appetite for risk. Commodity currencies were lower as a trade war would impact global growth.
Global stocks were in the red as the trade war narrative continues with the tech sector particularly hit.
OIL – Energy Demand Impacted by Ongoing Trade Dispute
GOLD – Yellow Metal Rises as Safe Haven Appeal Returns
STOCKS – US-China Dispute Hits Tech Sector the Hardest
OIL – Energy Demand Impacted by Ongoing Trade Dispute
Oil prices fell on Monday as China retaliated against US tariffs despite earlier reports of attacks on Saudi crude tankers. Brent dropped 0.96 percent and West Texas Intermediate 1.33 percent as global growth expectations were hit by the trade dispute escalation. Supply disruptions have been the biggest factor driving prices higher. Geopolitical disruptions like the US sanctions against Iran and Venezuela, the Russian contaminated supply and the coordinated output cut from the OPEC+ have moved prices higher. The sabotage on Saudi tankers at first was positive for crude prices, but it was offset by the pessimism surrounding global trade.
A full-blown trade war would have lasting consequences on global growth, seriously limiting the upside for energy demand. Disruptions have balanced the market, but lower demand and rising US production could make for a quick reversal. 
The US-China trade deal was all but signed 10 days ago, and at this point it could be back on the table in the short term, removing some of the downward pressure for crude, but with higher disruptions to supply the agreement between OPEC and other major producers reaching an extension could be off the table. Political infighting at OPEC and Russia’s lack of commitment could end up disbanding the output limit deal, leaving Saudi Arabia with much to ponder on how to rebalance the market by itself.
GOLD – Yellow Metal Rises as Safe Haven Appeal Returns
Gold rose 1.03 percent on Monday. The yellow metal was a clear safe haven for investors after the US and China failed to reach an agreement on trade. Gold broke through the $1,300 price level as China announced it would retaliate against US tariffs triggering a bout of risk aversion that was beneficial to metal prices.
Trade pessimism impacted markets with yields falling and stocks being rattled. The market is starting to price in a rate cut for the Fed’s benchmark interest rate in 2019 as the economy could slow down if a trade war is not averted. The move could signal a return to lower rates that prevailed after the 2008 crisis. The US had managed to climb out of near zero rates but picking a fight with the second largest economy and raising barriers could end up losing all the momentum.
Gold remains bid as uncertainty on the outcome of the US-China trade negotiations will bring, with US Sec Mnuchin saying there are no set dates for a next round of talks.
STOCKS – US-China Dispute Hits Tech Sector the Hardest
Investors sold off equities as China answered the US tariffs that went live on Friday with their own tariffs. The trade deal between the two largest economies was all but signed, but last week a break in negotiations has made a positive outcome cloudier as both nations seem ready for a fight.
Volatility will remain high as the two nations remain far apart with the next meeting between leaders could come next month during the G20 in Japan. Equities will remain sensitive to trade comments as both parties seem confident with little signs of making concessions.
Apple was hit by a Supreme Court decision opening US antitrust rules to be used against the California company for its App Store. Uber would be ruing their luck as the timing of their IPO brought them to market during a new round of trade disputes. The ride hailing company is trying to convince investors that its post IPO pricing will mirror that of Facebook and Amazon which also had less than impressive debuts.
