US Stock-Index Futures Plummet on Trade War Concerns

Equities

Major US stock indices finished sharply lower on Tuesday amid growing trade tensions between China and the United States. President Donald Trump commented on the matter on Monday saying that the United States wasn't ready to strike a trade deal with China. Investors' risk appetite was heavily affected by the latest trade developments, and they were concerned about its effect on the global economic outlook. Moreover, the gap between the US 3-month yields and the US 10-year yields widened to -8.3bps, the biggest since the latest recession. The Dow Jones Industrial Average futures tumbled to a two-week low of 25227, the S&P500 futures dropped to 2787, and the Nasdaq futures declined to 7227, the lowest since March 11th.

USD

The dollar index which measures the greenback against a basket of major currencies edged higher towards 98.00, taking advantage for the European turmoil. The tensions between Italy and the European Commission escalated on the news that Italy could pay a fine for breaching the budget rules. On the other hand, the Brexit deadlock entered a new face with the resignation of Theresa May with no solutions looming. The euro and pound account for almost 70% of the dollar index basket, meaning a drop in these currencies will be in the dollar's favor. The EURUSD dropped to a low of $1.1153, and the GBPUSD tumbled to $1.2642.

CAD

The Canadian dollar traded lower against the United States dollar ahead of the bank of Canada monetary policy meeting. The bank is widely expected to leave interest rates unchanged at 1.75%. However, market participants will focus on the statement and the interest rate forward guidance. Moreover, the bank would likely comment on the recent 10% drop in oil prices, which occurred following the last monetary policy meeting. The USDCAD has been trading in a tight range between 1.3360 and 1.3520 since late April. Will today's meeting be a key mover for the pair to breakout for the consolidation zone?

Metals

Gold prices bounced off a low of $1276 to trade higher at $1284, as the US stock market and Treasury yields took a beating amid escalating trade tensions. Investors were concerned about the effect of the ongoing trade disputes over the US economic activity. Gold was a gainer as they rushed to safety. Meanwhile, the silver ounce hovered near $14.40, and palladium dropped from a high of $1350 towards $1335.

Oil

Oil prices slipped amid growing trade war concerns. A full-blown trade war between the world's largest two economies could deteriorate the global economic outlook and hurt oil demand. The West Texas Intermediate crude futures dropped to a low of 58.30, and the Brent futures declined to $69.31. Market participants await the weekly crude oil stock by the American Petroleum Institute later today ahead of the official figures by the US Energy Information Administration tomorrow.

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