CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Asia market update - fears of US-China trade escalation

Global equity markets can be seen taking a collective sigh towards the US-China trade impasse with the pullback on Thursday. Meanwhile, further aggravating developments look set to keep this drag going into the end of the week.

The evasion to safety continues

The setting remains little changed from a day earlier with the evasion to safety becoming more apparent across the market. The likes of the S&P 500 index saw a broad-based decline with fewer sectors spared in the steeper drop on Thursday. Prices had also declined towards the 2800 support at the lower end of the recent consolidation range, one to note with the trade impasse evidently still on its way towards further escalation with some of this morning’s headlines. The pressure on commodities had also been apparent, seeing the latest trade jitters sinking Brent crude prices firmly past the $70 per barrel level to a near 2-month low.

Heading into the Asia open, it is perhaps needless to say we are expecting the region to remain under the blanket drag from the trade friction. Early movers across the ASX 200, Nikkei 225 to the KOSPI were painted in a clear shade of red.

Over and above the threats exchanged, the lack of plans to resume negotiations between US and China appears to be inducing greater worries within the market that this prolonging trade conflict could worsen. It is apparent that the stakes on the table are rising. The possibility of a hike in tariffs to all Chinese imports places the pressure on the G20 meeting between the two Presidents to achieve an understanding for a delay to occur. Likewise the implementation of any additional retaliatory measures from China. Watch any dips past the 2800 level that could induce further selling pressure.

Source: IG Charts

Import duties on countries undervaluing currencies

Notably, this morning also saw reports highlighting that the US commerce department proposing duties on countries that undervalue their currencies relative to the US dollar which could further raise tensions. While no countries had been explicitly highlighted, Bloomberg’s report that the plan to allow US-based companies to seek anti-subsidy tariffs on goods from countries which the US Treasury Department noted to be engaging in competitive devaluation could mean a greater backlash for the markets. This is particularly so if President Donald Trump’s threat to label China a currency manipulator becomes a reality.

In light of the situation, it would be one watching the yuan movements over and above the sustained jitters within equity markets. Offshore yuan had declined sharply against the US dollar in recent sessions, USD/CNH was trading above the $6.90 level into this week. While there is no question that the Chinese currency fluctuates under a managed-floating system, the recent spate of fixing for the Chinese yuan as it rushed through the levels had shown that the authorities had attempted to curb the devaluation of their currency. The widening of the spread between the offshore and onshore yuan had also been poignant in showing the market-led move, thus undermining some of the grounds for the US to make such an accusation. That said, Chinese reaction will be one to watch in the upcoming sessions with the fixings and also whether this may extend the gloom within Asia markets.

Source: IG Charts

Yesterday: S&P 500 -1.19%; DJIA -1.11%; DAX -1.78%; FTSE -1.41%

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Seize your opportunity

Deal on the world’s stock indices today.

  • Trade on rising or falling markets
  • Get one-point spreads on the FTSE 100
  • Unrivalled 24-hour pricing

See opportunity on an index?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on an index?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from one point on the FTSE 100
  • Trade more 24-hour indices than any other provider
  • Analyse and deal seamlessly on smart, fast charts

See opportunity on an index?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.