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Asian shares drop before trade tariffs bite; yuan steady
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Commodities fall with iron ore futures at lowest since April
European stocks rose alongside U.S. futures while Asian shares dropped to a nine-month low as traders prepare for the implementation of fresh trade restrictions between the U.S. and China. The euro rallied on the prospect of earlier-than-anticipated monetary tightening.
Carmakers rebounded on hopes of a cross-Atlantic tariff deal, helping spur the Stoxx Europe 600 Index after gauges in Tokyo, China and Hong Kong all fell. The dollar edged lower as Treasuries dropped, while the yuan steadied. Commodities, heavily exposed to international trade, fell. Iron orefutures in Singapore hit the lowest since May.
The common currency strengthened and European sovereign bonds fell as investors repriced the trajectory of ECB rate increases and after data showed German factory orders surged in May. The pound held steady as U.K. Prime Minster Theresa May continues to seek backing for her vision of Brexit.
The trade conflict is poised to enter a new phase on Friday, with the imposition of fresh tariffs between the world’s two biggest economies. China said that it won’t be the first to act, and will hold off on enforcement until the U.S. does. Investors are also preparing for more end-of-week action in the shape of the latest Federal Reserve minutes and American jobs data.
Elsewhere, Brent crude fell as traders weigh tightening U.S. supplies against a pledge from Saudi Arabia to expand output. Emerging-market shares dropped for the eighth time in nine days, and developing-nation currencies nudged lower.
Terminal users can read more in Bloomberg’s Markets Live blog.
These are key events coming up this week:
- Federal Reserve releases minutes of its June 12-13 meeting, when FOMC policy makers raised the benchmark rate a quarter point for the second time this year and lifted the median forecast to four total increases in 2018.
- U.S. payrolls are due Friday.
- Also on Friday, the U.S. is scheduled to impose tariffs on $34 billion of Chinese goods. Beijing has said it will slap tariffs on an equal value on U.S. exports including agricultural and auto exports.
Here are the main market moves:
Stocks
- The Stoxx Europe 600 Index climbed 0.3 percent as of 9:41 a.m. London time, to the highest in almost two weeks.
- Futures on the S&P 500 Index advanced 0.4 percent, the largest gain in a week.
- The MSCI All-Country World Index advanced less than 0.05 percent.
- The MSCI Emerging Market Index dipped 0.4 percent to the lowest in a week.
- The MSCI Asia Pacific Index sank 0.5 percent to 162.57, the lowest in nine months.
Currencies
- The Bloomberg Dollar Spot Index decreased 0.1 percent to the lowest in more than three weeks.
- The euro gained 0.3 percent to $1.169, the strongest in more than a week.
- The British pound advanced less than 0.05 percent to $1.3231, the strongest in more than a week.
- The Japanese yen dipped 0.1 percent to 110.63 per dollar.
Bonds
- The yield on 10-year Treasuries advanced three basis points to 2.86 percent, the largest rise in more than two weeks.
- Germany’s 10-year yield increased three basis points to 0.34 percent, the highest in more than a week on the biggest increase in more than three weeks.
- Britain’s 10-year yield advanced two basis points to 1.298 percent, the highest in more than a week.
Commodities
- The Bloomberg Commodity Index decreased 0.1 percent.
- Brent crude declined 0.4 percent to $77.91 a barrel.
- LME copper increased 0.4 percent to $6,408.50 per metric ton, the largest climb in more than three weeks.
- Gold fell 0.1 percent to $1,254.11 an ounce.
By Adam Haigh and Eddie van der Walt
July 5, 2018, 6:52 PM GMT+10
— With assistance by Jana Randow, and Srinivasan Sivabalan
Source: Bloomberg