News

US Stock Futures Tumble As US-China Tensions Hit Risk Appetite

Equities

Major US stock-index futures declined sharply as the growing tensions between China and the United States weighed on risk appetite. China ordered the United States to close its consulate in Chengdu as a response to US’s order to close the China consulate in Houston. On the other hand, the US Secretary of State Mike Pompeo offended the Chinese President Xi, by saying in his press conference that the latter is a true believe in totalitarian ideology. US President Donald Trump commented on the Phase 1 trade deal declaring that it means much less to him now. All these developments are taking the clashes between the two countries to a new level. Also, another factor behind the move lower was the announcement of the Republican Senate majority leader, Mitch McConnell that his party’s stimulus proposal will be delivered next week, instead of yesterday morning. The Dow Jones Industrial Average futures fell to 26290, the S&P500 futures dropped to 3198, and Nasdaq futures tumbled to 10378.

USD

The dollar index which measures the greenback against a basket of major currencies dipped further to 94.59, the lowest since September 2018. The continued uncontrolled outbreak of the Coronavirus in the United States, which could hurt economic recovery, made other currencies more attractive. The US initial jobless claims came in at 1.416 million, well above forecast of 1.3 million. Market participants are looking forward to the preliminary reading of the Manufacturing and Services PMI for July, to grasp more information about the recovery. The EURUSD extended upside rally to $1.1626, the highest since September 2018, and the GBPUSD rallied to a six-week high of $1.2773.

Gold

Gold prices added to their prior gains supported by the growing stimulus bets and the intensifying US-China tensions. The White House economic advisor Larry Kudlow stated that the Trump administration is willing to put more relief loans money in stimulus. On the other hand, the US-Sino tensions are rising to an unprecedented levels as both countries are ordering to close consulates. The price of a gold ounce rallied to a fresh nine-year peak of $1898, the price of a silver ounce dipped slightly to $22.50 on profit-taking, and palladium futures hovered above $2200.

Oil

Oil prices drifted lower amid growing fears over the economic recovery, and renewed US-China tensions. The uncontrolled coronavirus outbreak in the United States is forcing lockdown measures again, which would weigh on oil demand levels. On the other hand, the escalating tensions between the world’s largest economies pose risks on the economic recovery, which also could be negative to oil prices. The West Texas Intermediate crude September delivery dropped to $40.70, and Brent blend September delivery declined to $43.00.

Major Economic Events

GMT Country Event Expectation Previous

8:30

UK

 Manufacturing PMI 

52.0

50.1

8:30

UK

Services PMI

51.1

47.1

13:45

US

 Manufacturing PMI 

51.5

49.8

13:45

US

Services PMI

51.0

47.9

14:00

US

 New Home Sales (Jun)

700

676

17:00

US

 U.S. Baker Hughes Oil Rig Count

-

180

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