News

Trump Derails Markets

Equities

Major US stock-index futures traded lower amid intensifying trade tensions and growth concerns. The Chinese tariffs on $60 billion of US goods will be effective as of June 1st. Moreover, China has set a plan to limit rare earth export to the US as a tool to fight the United States in the ongoing trade war. On the other hand, President Trump slapped Mexico with 5% tariffs and will be raised to 25% in October to force Mexico to take measures to stop illegal immigration. Mexico promised to respond strongly if the US imposes tariffs. The bad news to the global stock market continues to come out with the Chinese Manufacturing PMI missing estimates and dropping to a contractionary level. The Dow Jones Industrial Average futures declined to 24913, the lowest since early February, while S&P500 and Nasdaq futures dropped to 2761 and 7163, respectively, the lowest since early March.

USD

The dollar index which measures the greenback against a basket of major currencies retreated from a one-week high of 98.28 to trade lower at 98.05 as investors eye the PCE report today. The second reading of the first quarter GDP figure came in line with expectations, showing that the US economy grew by 3.1% during the first quarter of 2019. However, the GDP price index missed estimates with a reading of 0.5%, the lowest since 2016. Market participants will focus on the Fed's favorite inflation gauge, the Personal Consumption Expenditure, as it will have an impact on the future path of interest rates. The probability of an interest rate cut by the Federal Reserve in its October meeting sits at 42.9%. The US 10-year yields declined to 2.171%, the lowest since September 2017, the USDJPY tumbled to a four-month low of 108.78, and the EURUSD edged higher to $1.1145.

Metals

Gold prices raced higher as the dollar depreciated and Treasury yields extended losses. The precious metal is gaining on its safe-haven status amid growing market risks and uncertainties. The price of a gold ounce rose to a two-week high of $1295, the silver ounce held steady near $14.50, and palladium hovered above $1360 for the first time since the 6th of May.

Oil

Oil prices fell sharply amid growing concerns over the global economic outlook. The ongoing trade protectionism is threatening the global economic activity, which is also hurting the demand for oil prices. The May Chinse Manufacturing PMI came in at 49.4 missing estimates of 49.9. On the other hand, the US Energy Information Administration reported that the weekly crude inventories dropped by 0.282 million barrels last week. Both benchmarks were uninterested with the report where the West Texas Intermediate crude futures tumbled to $55.59, and Brent futures plunged to $64.27, the lowest since early March.

Major Economic Events

GMT Country Event Expectation Previous

12:30

CA

GDP (MoM) (Mar)

0.4% -0.1%

12:30

US

Core PCE Price Index (YoY) (Apr)

1.6% 1.6%

14:00

US

Michigan Consumer Sentiment (May)

102.0 102.4

17:00

US

U.S. Baker Hughes Oil Rig Count

  797

 

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