- China announces retaliatory levies on US imported goods worth roughly $34 billion starting on 6 July
- Stocks’ slump extends, a slight risk-off mode seen across currencies
- Three OPEC members are likely to block a proposal to increase production
In line with expectations the US administration imposed new tariffs on goods imported from China worth $50 billion. It added that it’s ready to slap more levies once China retaliates, and it actually did so a couple of hours later. The Chinese State Council’s commission announced a 25% tariff on US goods (mainly agriculture products along with cars) worth approximately $34 billion coming into effect on 6 July. Moreover, China aims to impose tariffs on goods worth $50 billion, albeit an additional $16 billion package has to be undergone public review. So far, the US has not commented the China’s decision, but if it does so, it could reignite trade tensions anew leading to a deeper sell-off across equities and underpinning safe haven currencies. This theme is already seen in the morning when both Japanese yen and Swiss franc are among the best major currencies while Asian stocks are declining. As for 6:39 am BST the Japanese NIKKEI (JAP225) is the worst performer sliding a bit more than 0.8%, and Chinese indices are not far behind. Notice that the US SP500 futures are pointing to a negative opening being traded roughly 0.5% lower in early European trading.
Apart from Chinese tariffs, those revelations occurred on late Friday, we were offered two macroeconomic readings from New Zealand and Japan. The former country informed that services PMI, measured by BNZ, increased in May to 57.3 from 55.9 while an improvement was seen in all five sub-indices. In turn, Japan reported a much deeper than expected trade deficit for May equal -578.3 billion JPY while just -205.2 billion JPY had been forecast. It was mainly driven by soaring imports (+14% y/y) while exports totalled 8.1% y/y.
Last but not least, the OPEC/non-OPEC meeting is among top events for this week, and there are some conjectures that an increase of production might be put forward by Saudi Arabia and Russia. However, there were some reports over the weekend that three members such as Iran, Venezuela and Iraq are likely to block a proposal. The report said that “if the two countries want to act alone, that’s a breach of the cooperation agreement” adding that “a production increase is not on the table as the market is stable and prices are good”, according to Iraqi oil minister.
Both WTI and Brent prices are falling in the morning ahead of this week OPEC/non-OPEC meeting. Technically speaking WTI prices broke through a trend line opening a way to further falls. The nearest technical supports might be found at $62 ans $58. Source: xStation5