Stocks rose in Europe on Monday after markets traded mixed in Asia as investors mulled three weeks of global declines amid escalating U.S.-China trade tensions. Core sovereign bonds in the European Union advanced after mainstream parties held their ground against populists in elections. The Euro Stoxx index climbed, helped by Fiat Chrysler's proposed merger with France's Renault, which drove up both carmakers' shares. U.S. stock futures drifted. Italian bond yields jumped as the country was said to face a $4 billion fine over failure to rein in debt. The yuan steadied after a senior Chinese economic official said speculators "shorting the yuan will inevitably suffer from a huge loss." The yen fell as the U.S. and Japan discussed a trade deal. The euro held most of its gains from Friday, while the dollar rose against a basket of major currencies. With holidays in the U.K. & the U.S. today, trading volumes could be lighter than usual.
Yesterday, USDCAD climbed from 1.3430 up to 1.3500 after having fallen to a 1 month low of 1.3357 on Wednesday. The main catalyst was a near 6% plunge in oil prices and a 400+ point drop in the DJIA. North American equity markets managed to recover somewhat and USDCAD eased back to hold a 1.3465/88 range for the balance of the session. Overnight, global equity markets recovered from yesterday's sell-off while oil prices moved back towards the $59 level. U.S. durable goods data came in weaker than expected and the USD is now the worst performing currency on the day. USDCAD dropped to session lows at 1.3439 after the data this morning before moving back up to 1.3465 as oil prices reversed back towards $57 and equity markets gave up the bulk of earlier gains. USDCAD has since eased back towards session lows. The GBP has been especially resilient today after PM May resigned and front-runner Boris Johnson commented on a possible "Hard-Brexit".
Stocks slumped globally on Thursday and traders took refuge in gold and bonds as the simmering trade dispute between the world's two largest economies took a greater toll on markets. The yen gained along with the dollar as the flight to safety continued. Meanwhile 10 year Treasury yields fell to their lowest level since 2017. Energy shares slumped as oil fell below $60 a barrel.
Most U.S. stocks declined on news that the White House was prepared to target more technology firms in its trade wrangling with Beijing, while U.S. Treasury Secretary Steven Mnuchin said President Donald Trump is likely to meet with his Chinese counterpart at the end of June. The S&P 500 Index opened lower after reports that the White House was considering blacklisting China's video-surveillance firms. But Mnuchin's remarks Wednesday may help fuel optimism that trade talks can still bear fruit. Meanwhile, energy shares slid along with crude futures after the EIA reports an unexpected buildup in U.S. oil and gasoline stockpiles. Debt and equity markets continue to run hot and cold as investors react to the near-daily salvos in the U.S.-China trade conflict, trying to size up how much damage they will bring to growth and supply chains. Investors will have more data to chew on after the release of the minutes from the Federal Open Market Committee's April 30-May 1 meeting.
Stocks headed cautiously higher Tuesday morning following a temporary reprieve on restrictions on U.S. exports to China telecom giant Huawei Technologies, reflecting a slight reduction in one front of the Sino-American tariff war. U.S. officials said late Monday they would offer some temporary exceptions to an export blacklist against Huawei Technologies Co., which will provide some suppliers and customers of China's telecom giant a 90-day reprieve from tough trade penalties—a move that appeared to soothe investor anxiety somewhat.
Yesterday, USDCAD dropped from 1.3450 down to 1.3400 before climbing back to hold a 1.3455 - 1.3470 range for the balance of the North American session. Equity markets and commodity currencies were under pressure last night as reports suggest China has no interest in trade negotiations with the U.S. until the U.S. shows some sincerity. The GBP fell for the 9th out of the past 10 days after Brexit talks stalled yet again. USDCAD climbed to 1.3514 - just shy of the 4 month high of 1.3522 tested back on April 24th. Trade above 1.3500 was short-lived and the pairing has fallen to session lows at 1.3455. The DJIA winning streak looks to continue now up 4 straights days after erasing a 200 point deficit this morning. There are further details on the removal of steel and aluminum tariffs first reported Wednesday that are helping push the CAD higher – it is now the best performing currency on the day after opening today's NA session as the worst performing currency next to the GBP.
The rebound in risk assets from the trade-fomented sell-off continued, with U.S. stocks rising a third day and Treasuries slumping anew even as markets remain susceptible to fresh tariff headlines. The S&P 500 headed for the biggest three-day rally in more than a month, boosted in part by solid earnings from Cisco Systems Inc. and Walmart Inc. along with strong housing data. Trade tensions remained in the forefront, though, as the Trump administration threatened to blacklist China's Huawei Technologies Co. and Walmart warned tariffs would lead to higher consumer prices. The 10-year yield topped 2.4% and the dollar strengthened.
U.S. stocks turned higher on the prospect that President Donald Trump will delay imposing tariffs on auto imports. The S&P 500 wiped out declines of as much as 0.7% after it was reported the president would delay by up to 6 months a decision on car tariffs that was due by Saturday. The tech-heavy Nasdaq 100 also rose as Treasury Secretary Steven Mnuchin added to hopes of a trade deal when he said U.S. officials were in serious talks with China to improve trade ties. Shares fell in early trading after weak U.S. retail and factory numbers spurred growth concerns. Treasuries gave back gains after the 2-year yield touched the lowest level since February 2018, while 10-year traded around 2.68%. Oil retreated as mounting tensions in the Middle East over U.S.-Iran relations added to demand for haven assets. The unexpectedly weak U.S. economic numbers on the back of data pointing to slowing growth out of China heightened investors concerns that the trade war could weigh on a global economy that's already staggering. Adding to those woes is a growing sense of unease in the Middle East after a spat of attacks on oil assets ratcheted up an already tense relationship between America and Iran.
The US dollar advanced broadly while stocks took their first baby steps into positive territory after a pounding based on the Trade dispute between China and the U.S.. The market remained cautious after the tit for tat tariff game being played out within the global economies most important trade relationship. The negatives of even further U.S. tariffs being slapped on Chinese goods is being offset by the fact that the parties are still scheduling talks.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The JPY was the top performing currency this week while the GBP was the weakest. The USD also saw broad declines at various points during the week. USDCAD initially gapped higher from 1.3420 up to 1.3465 at the opening in response to the risk aversion flows / stock market sell-off from Trump's weekend tweet. He threatened to raise tariffs on $200 billion worth of Chinese goods from 10% up to 25%. He also mentioned that 25% tariffs on an additional $325 billion worth of goods could follow shortly. Reports suggest that the U.S. and China were close to a trade agreement when China retreated and wanted to re-negotiate. USDCAD climbed to 1.3495 before reversing course and falling to 1.3410 in early Tuesday trade. Equity markets had pared back significant losses during Monday's session while oil prices jumped 5% after initially falling 3%. The rest of the week remained volatile with large swings as reports of trade war escalation were offset with trade deal optimism as the Chinese trade Delegation made its way to Washington. The tariffs officially went into effect at 9:00pm Thursday night and global equity markets saw large declines in early Friday trade. Reports that some trade-deal progress was made saw markets pare earlier losses while the USD broadly declined. USDCAD had been testing the 1.3480 – 1.3505 resistance area for much of the week but declined to test the May lows near 1.3380 on Friday. Canada added a record number of jobs in April – 106,500 of which 73,000 were full-time. The unemployment rate declined further while wages gained. U.S. inflation data came in slightly weaker than expected. The move below 1.3400 did not last and USDCAD moved back to hold a 1.3415 – 1.3440 range for the balance of Friday's session.
U.S. stocks and commodities sank after China retaliated with higher tariffs on a range of American goods. Treasuries jumped with the yen on demand for haven assets. The S&P 500 headed for the biggest decline since Jan. 3 and the Dow Jones Industrial Average slumped more than 500 points after China targeted some of the nation's biggest exporters. The dollar erased gains and 10-year Treasury yields fell to the lowest level since late March. Oil climbed as Saudi Arabia said two of its tankers were sabotaged. Risk assets have been under pressure all morning after President Trump warned China not to retaliate after the latest round of American measures. The selling picked up when China said it will raise tariffs starting June 1. An unverified Twitter post purportedly by China's Global Times suggested the possibility of selling some of Treasuries holdings. The escalation comes after talks ended last week in a stalemate, with no timeline for future discussions. Investors are struggling to find positive catalysts for risk assets after the U.S. stepped up punitive tariffs on $200 billion in annual imports from China, and Trump started his Monday morning threatening that the trade standoff will get worse if there's retaliation. While both economic superpowers have also worked hard since talks ended Friday to project calm and emphasize that they plan to continue negotiations, markets seem to sense fundamental divisions between the 2 sides.
Yesterday, USDCAD climbed from 1.3470 up to 1.3505 before falling back to 1.3459 as North American equity markets pared back heavy losses and the USD broadly declined. USD declines continued into the Asian session where progress reports on U.S. / China trade talks saw global equity markets move higher and the USD move lower. USDCAD dropped to 1.3435 before climbing back towards 1.3480 ahead of the Canadian jobs report and U.S. inflation report. Canada added a staggering 106,500 jobs in April of which 73,000 were full-time. The unemployment rate declined while participation and wages both rose. U.S. inflation was essentially flat and the USD broadly declined with the USD index falling to a 3 week low. USDCAD also declined towards a 3 week low @ 1.3380. The pairing has since bounced to 1.3440 as North American equity markets come under pressure – the DJIA is down 300+ pts and is down about 1,000 pts this week as another round of U.S. tariffs on China goods went into effect last night.
Stocks stumbled at the open of U.S. trading as a deadline approached for America and China to raise reciprocal tariffs. The yen climbed with Treasuries as investors sought havens, while the yuan fell to its weakest since January. The S&P 500 and Nasdaq Composite fell for a fourth day. In Europe, automakers led a retreat for the Stoxx Europe 600, which followed Asian benchmarks down after President Donald Trump ratcheted up his hard-line rhetoric on trade. The MSCI Asia Pacific gauge dropped the most in six weeks. Treasury 10-year notes jumped, hours after Wednesday's auction saw the weakest demand for the benchmark bond in a decade.
U.S. stocks swung between gains and losses as investors questioned President Donald Trump's suggestion that a trade deal with China remained possible this week. The S&P 500 was virtually flat after at 2-day trade-fomented rout wiped more than $500 billion from the value of American equities. Trump had stemmed the losses with a tweet that China had just informed "us" that they "are now coming to the U.S. to make a deal." Equities fell earlier in Europe and Asia, with big declines seen in Japan and Hong Kong. Treasuries climbed as investors sought haven assets. The euro edged higher on upbeat German factory data. The escalation of Trump's rhetoric on trade in the past few days appears to have caught global equity markets off-guard. Many had been testing record highs, seemingly priced to perfection on the assumption a deal between the U.S. and China would get done. The likes of JPMorgan boss Jamie Dimon still put the odds of that at 80%, nonetheless investors will be on edge as China's top trade negotiator visits Washington this week. Elsewhere, the yuan edged lower as data showed Chinese exports unexpectedly fell in April and imports rose. The New Zealand dollar slumped more than 1% as the central bank cut interest rates, though it later pared most of the drop. Oil swung between gains and losses. In emerging markets, the lira extended losses against the dollar amid the fallout from Turkey's decision to re-run municipal elections in Istanbul. The South African rand strengthened as the country headed to the polls for a national election.
U.S. stocks fell for a second day as investors remained on edge over President Donald Trump's threat to increase tariffs on billions of dollars of imports from China. The dollar gained and Treasury yields were mostly steady. The S&P 500 Index retreated amid speculation that the imposition of fresh levies would upend the global economy. China's top trade negotiator still intends to visit Washington later this week as Trump ratchets up pressure to clinch a deal that many market participants had expected was all but done. The Stoxx Europe 600 Index touched a five-week low. Korean and Japanese shares slid as both markets reopened after holidays, though stocks in Shanghai and Hong Kong climbed.
VBCE Daily Foreign Exchange Update for Monday, May 06, 2019
USDCAD spot rate: 1.3450 - 1.3455 (as at 8:11am PST)
Technical Support / Resistance:
Key Economic Data Releases:
- No major data releases
Ivey purchasing managers index
Int'l merchandise trade
Net employment change, % rate, average hourly wages, bldg. permits
Producer price index, trade balance
Equities slumped globally and Treasuries rallied after President Donald Trump's threat to increase tariffs on Chinese imports called into question the chances of a resolution to the trade war. The S&P 500 index tumbled by the most since March before paring losses, signaling a potentially volatile week on Wall Street. From JD.com and Skyworks to Apple and Caterpillar, tech companies with China exposure and machinery companies, which are seen as proxies for the trade war, were among the biggest decliners in early trading. The VIX gauge of stock volatility headed for its biggest increase this year. Seeking to ramp up pressure on China for more concessions, Trump threatened in two tweets to more than double tariffs on $200 billion of Chinese goods and impose a fresh round of duties on top of that. Talks to resolve the year-long trade standoff appeared to be on life-support Monday, with Beijing struggling to fully respond. China's foreign ministry said that officials were still planning to travel to the U.S. for the next round of negotiations, but it was unable to confirm when amid signs that a delay is now being considered.
Yesterday, USDCAD climbed from 1.3435 up to 1.3475 before falling back to 1.3445. The pairing then eased higher to hold near 1.3460/70 for the balance of the session – just below the weekly high of 1.3481. Today, USDCAD quickly spiked from 1.3465 up to 1.3490 after the 5:30am release of the U.S. jobs data. Monday's 1.3481 high was marginally beaten but the trend quickly reversed as the USD broadly weakened. Although headline data looked surprisingly strong, other details suggest otherwise. Factoring in a 0.2% decline in the labour participation rate, the unemployment rate was essentially unchanged. Despite the large gain in jobs, wage inflation was unchanged (giving the Fed less of a reason to raise interest rates). USDCAD has fallen below yesterday's low at 1.3435 to 1.3407 - the next target is the weekly low of 1.3375. The pairing has since bounced to 1.3427 and fallen back towards 1.3410.
U.S. stocks rose in the wake of the Federal Reserve's decision as traders awaited Friday's jobs report. Treasuries declined. The Dollar rose against most of its peers.Traders pared bets on the Fed's next move being a cut after Chairman Jerome Powell said the central bank has no bias to either tighten or ease policy.
Currently, the TSX is down 0.18% and the DJIA is up 0.09%. EURCAD is up 0.02% trading between 1.5034 and 1.5081. GBPCAD is up 0.02% trading between 1.7505 and 1.7581. JPYCAD is up 0.27% trading between 0.01203 and 0.01206. Gold is down 0.56% trading between $1,266 and $1,277USD/oz, silver is down 0.51% trading between $14.59 and $14.72USD/oz, while oil (WTI crude) is down 2.23% trading between $61.83 and $63.67.
U.S. stocks pared their advance after disappointing factory data from the world's largest economy and treasuries climbed before the Federal Reserve's decision. The S&P 500 Index struggled to build on its rally after reaching another record high. Just hours before the Fed's decision on rates, data showed that a gauge of U.S. factories fell in April to the weakest since 2016. The report weighed on stocks after an almost 18% surge in the benchmark measure this year sparked calls for a pause. All eyes will now turn to Fed Chairman Jerome Powell's press conference following the rate decision, with policy makers widely expected to be on hold while expressing concern over muted inflation. Developments in the trade conflict between America and China are on the radar, with U.S. Treasury Secretary Steven Mnuchin calling the latest round of meetings "productive." Negotiations will continue in Washington next week. Elsewhere, holidays across much of Asia, Europe and Latin America crimped trading volumes.
A gauge of China's factory activity weakened sharply, suggesting that any turnaround in the world's second-largest economy after months of slower growth has yet to take root., suggesting that any turnaround in the world's second-largest economy after months of slower growth has yet to take root. Meanwhile in Canada, GDP for February disappointed fueling further speculation that any near term interest rate hikes by the Bank of Canada are off the table. Currently, the TSX is up 0.01% and the DJIA is up 0.02%. EURCAD is up 0.22% trading between 1.5041 and 1.5110. GBPCAD is up 0.96% trading between 1.7393 and 1.7551. JPYCAD is up 0.49% trading between 0.01204 and 0.01209. Gold is up 0.50% trading between $1,279 and $1,286USD/oz, silver is up 0.33% trading between $14.81 and $15.01USD/oz, while oil (WTI crude) is down 0.02% trading between $63.00 and $65.00.