Macro Afternoon

Trumps new round of tariffs has pulled the rug out from the confidence rally of recent days with the Chinese stock markets taking the biggest hits. The USD is rallying against the Yuan and the Aussie dollar in response and combined with the lead here in Asia is sure to put a dampener on the upbeat earnings season start on Wall Street tonight.

The Shanghai Composite is off more than 2% to close at 2761 points, well below the previous level of support at 2800. The Hang Seng Index is down a similar amount, off 1.6% to 28210 points. This takes back all the previous gains on the recent swing and back to key support near 28000:

S&P futures have retraced significantly alongside Eurostoxx, with the latter down 0.7% as risk re-evaluates the tariffs. I said yesterday that price action smelled more like a rollover with price well extended and momentum reverting to the mean, and now we’ve got trailing ATR support under threat to turn this into another dip:

Japanese stocks pulled back with the Nikkei 225 down 1.2%, closing at 21932 points, reclaiming the previous session gains and now back below daily ATR support at the 22000 point level. The USDJPY pair is back above temporary resistance at the 111 handle, with momentum now back on track and overcoming the usual Yen safe haven bid:

The ASX200 was not left unhurt, falling some 0.7% to close at 6215 points, still holding onto what has been sturdy buying support throughout this trade war so far. The Aussie dollar however has taken a heavy hit, retracing straight to ATR support at the 74 handle and possibly wipe out all of the pre NFP gains:

The data calendar continues tonight with the US earnings season and both Mike Carney and Mario Draghi delivering currency sensitive speeches with the possible catalysts of Trump in Europe.

Comments

  1. This should be interesting….

    michael hudson
    July 11, 2018 at 5:54 am

    I’be been spending the past week in England, and there is almost no understanding of MMT here. What passes for the left — from the British Labour Party to the Trotskyist and other left — seems committed to balanced budgets and austerity. Money and budget deficits seem to be based on a psychodrama, instead of looking at balance-sheet relations.

    Nobody speaks of banks “running deficits” by borrowing to create credit –that is to say, creating endogenous credit and creating a liability on the other side of the balance sheet. No idea that governments can operate like banks, spending money by issuing bonds to the central bank in a self-financing process just like the private banking sector in practice.

    There seems no idea that if governments guarantee bank deposits, they can tell banks what to lend for and what NOT to lend for. And there is an idea that even reckless loans should be written down, but the creditors (bank bondholders and large depositors in excess of deposit-guarantee levels) should be paid in full — a guarantee for junk mortgages and other fraudulent loans.

    So the problem is how to spread the US awareness to Britain and other countries?

    https://www.nakedcapitalism.com/2018/07/political-representation-european-people.html

  2. Cyclone Ranger

    The bourse known as theDAX is down 1.32%.
    The red team is up 6-nil.

    Not sure which I’m happier about.
    An embarrassment of riches tonight.

  3. How will this impact the Chinese housing market ? …

    Trump’s Tariff Barrage Pushes China Fight to Point of No Return – Bloomberg

    https://www.bloomberg.com/news/articles/2018-07-11/trump-s-tariff-barrage-pushes-china-fight-to-point-of-no-return

    Beijing ‘shocked’ by Trump unveiling new tariffs on $200bn of Chinese goods as stocks slide … UK Telegraph … behind paywall …

    https://www.telegraph.co.uk/business/2018/07/11/stocks-slide-trump-steps-trade-war-unveiling-200bn-new-tariffs/

    China to its state media: keep calm, don’t inflame trade row with U.S. | Reuters

    https://www.reuters.com/article/us-usa-trade-china-media/china-to-its-state-media-keep-calm-dont-inflame-trade-row-with-u-s-idUSKBN1K118L

  4. Expectations on house prices and credit availability plummet
    https://www.afr.com/real-estate/expectations-on-house-prices-and-credit-availability-plummet-20180711-h12j7h
    [by Matthew Cranston

    Confidence in house price growth and the availability of finance has plummeted with a tripling of the number of surveyed property professionals lowering their expectations in those two areas.

    The ANZ-Property Council of Australia survey, which covers just less than 1000 respondents from across the country, shows that the number of people who expect the availability of debt finance to worsen over the next 12 months has tripled.]

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