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US-China tensions roil the markets

Summary:

  • Retaliatory Chinese sanctions shock markets
  • Grains drop sharply, stocks hit with selling
  • Oil looks to recover after DOE draw
  • ADP beats forecasts 
  • Crypto hedge fund industry growth slows

Reports that China is going to impose reciprocal duties on 106 US products including soybean (a 25% tariff) have roiled markets today. Chinese tariffs are to be applied to $50 billion US goods and they are to be focused on agriculture products such as wheat, corn, cotton or tobacco as well as US cars and chemicals. Stocks sold off almost immediately on the news but they have recovered somewhat into the European close. 

The US500, US100 and DE30 are all at interesting levels at the moment. Watch our video  covering the latest technicals and things to keep an eye on here

The markets most effected by the news are arguably grains. Both Brazil and the US are among the largest soybean producers in the world, and both are the key soybean suppliers to China. Once the Chinese levies take effect it could result in lowered demand from the US and this has been felt today in the Soybean price which has declined over 3%

The weekly DOE inventories have shown a large decline of 4.6M barrels according to the latest data, which was well below the consensus forecast for +1.4M. What is more the decline is only the 2nd drop in the last 6 prints and the largest decrease since January. Unsurprisingly the initial reaction to the drop was positive with Brent Oil surging higher by around 80 points. The market remains lower on the day but tonight’s close could be crucial to watch for further hints as to strength or weakness going forward. 

The main event on the economic calendar this week is the NFP report due out on Friday and today’s ADP has raised hopes for a strong print in beating forecasts. The market reaction to the ADP was relatively subdued with wages likely to take precedence over jobs added come Friday. 

Many of the cryptocurrencies have seen their prices decline in today’s early trading with Bitcoin once again dropping towards $7000 mark. Last year’s surge in cryptocurrency market spurred increased interest among broad audience causing cryptocurrency fund industry to boom. This year is much more worse however as the average performance of crypto hedge funds was a loss of 23.31% in the first quarter.

A short video covering Bitcoin, Ripple and Litecoin can be found here.  

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