US stocks turn red as China contests WTO retaliation during latest trade war skirmish

The minute of the Tuesday market

• Global stocks are declining as China has applied to the WTO for permission to sanction the United States against the 2013 anti-dumping decisions.
• Hang Seng slips at a touching distance from the "bear market" as Asian stocks fall for the ninth consecutive session.
• The US dollar weakens modestly, but treasury bill yields are $ 38 billion on 10-year bond sales and 30 years later this week.
• CME Group's FedWatch tool is likely to see a 75% rate hike in December, as investors reset expectations after last week's payroll and wage data.
• Oil prices rise as markets prepare for US sanctions on Iranian crude oil; The WTI-Brent reduction exceeds $ 10 a barrel.
• US equity futures are at 70 points for the Dow Jones Industrial Average.

Snapshot of the market

Global equities weakened on Tuesday as investors remained extremely concerned about developments in the Washington-Beijing trade war, as China would ask the World Trade Organization to impose tariffs on anti-counterfeit goods. dumping of five years.

The move offset previous gains for US equity futures, which had risen early in the European session, and contracts related to the Dow Jones Industrial Average. Some 150 points of their morning peak now indicate a 75-point drop in the opening bell. Futures related to the S & P 500 , meanwhile, were marked down 5.5 points following news of China's approach to the WTO. Nasdaq Composite futures were down 16 points from the close of last night.

China won a case at the WTO, first introduced in 2013, two years ago, when the panel agreed that certain methods used by the United States to enforce duties on goods considered as "sold" or sold in the United States the domestic market vendors have been unfairly applied.

Returning to the WTO panel, as the United States prepares to impose new tariffs on the $ 200 billion worth of products made in China, President Donald Trump threatens to exceed $ 500 billion . Return to the United States if the current trade war gets out of hand.

Here in Europe, the Stoxx 600 index rose slightly during the first minutes of trading in Frankfurt, the benchmarks showing cautious earnings despite a stronger euro, which traded at 1.1616 against the greenback before toppling back in the early afternoon.

The British FTSE 100 raised its bar to 0.7% while the pound rose to 1.3033 following comments by Michel Barnier, the chief negotiator of the European Union, suggesting that the two parties might 'realistic' agreement in their demands and data showing that domestic wages have risen at the fastest pace since March.

Most Asian markets were closed when Chinese news was recorded, but shares in the region were generally weaker, as investors focused on the strength of the US economy and rising bond yields. Treasure.

This US growth, highlighted not only by the Federal Reserve's GDPNow forecast, a 4.4% advance in the third quarter, but also by non-farm statistics from last week that showed that domestic wages have grown the fastest in nine years. on the eve of two key bond auctions this week that seem to attract billions in foreign investment and weaken currencies in Aisa.

While the yen fell to 111.43 against the dollar, Japan's Nikkei 225 gained 1.3% on Tuesday to raise the benchmark to 22,664.69 points, while most the growing region. Hong Kong's Hang Seng index was the main decline, dropping 0.51% at a few points in the bear market, a term used by investors to describe an asset that dropped by at least 20% compared to its recent peak.

Asian weakness led to a 0.49% decline in the MSCI ex-Japan index in the last trading hours, ensuring a ninth consecutive day of weakness for the regional benchmark. More worrisome perhaps, the Chinese yuan reached its lowest level in two weeks at 6.8741, suggesting that the authorities are preparing to use the weakness of the currency as a tool of retaliation against President Trump on trade and prices.

A similar dynamic will likely shape the negotiations between the United States and Canada today in Washington when Chrystia Feeland will meet with US Trade Representative Robert Lightheizer to revive negotiations for a trade agreement before the end of September.

Even with this questioning about the fate of a NAFTA agreement that underlies $ 1.2 billion in annual trade and the president's warning to take the value of Chinese-made products destined for US tariffs in excess of $ 500 billion, the US dollar was modestly lowering day-to-day trading and handshaking at 95.07 against a basket of its global competitors before turning 95 , 11 on the session as market sentiment changed abruptly as a result of WTO headlines in China.

A key test of this sentiment will come tomorrow and Thursday in the form of 10-year and 30-year Treasury bond auctions, which could lead to a further rise in yields as investors renounce new bonds of $ 38 billion. the specter of faster inflation – and rate hikes from the Federal Reserve – following data from last week.

The 10-year benchmark bonds traded at 2.941% during overnight trading, while the 2-year bonds rose to 2.719%, the highest since July 2008. The FedWatch tool of the CME Group now expects a 75% rate increase probability in December, the highest probability so far and 59.7% just a month ago. An increase of 25 basis points at the meeting of the Fed from 25 to 26 September in Washington is now a certainty of 98.4%.

World oil prices were again active on Tuesday, with Brent crude approaching $ 80 a barrel as investors began to fully consider the implications of the impending US sanctions that would limit the sale of Iranian oil to international customers. At the same time, US officials are not only trying to boost domestic production but also seeking more supplies from major OPEC producers such as Saudi Arabia and Russia. in Washington yesterday before visiting Energy Minister Alexander Novak in Moscow on Thursday.

Brent Contracts for delivery in November, the global benchmark, were 42 cents higher at their close on Monday in New York and $ 77.79, while WTI contracts for the same month were up $ 67.53.

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