Equities take heavy blows alongside other risky assets after Trump has done enough to re-escalate the trade strain by threatening China to raise tariffs over the weekend.
This move puts every potential deal in jeopardy after the alleged "positive" and "constructive" negotiations recently. This in general indicates that the two countries are much farther away from the agreement than we thought.
Knowing how China has responded in the past is certainly a step back because they will not sit on the negotiating table as they are threatened in this way. It is almost certain that this week's meeting is off (official announcement is still missing), or even if it isn't, it will not be of much importance.
The S&P 500 futures are down 2.0%, while the sea in red floods Asian assets, with China losing the most. Shanghai Composite lost 5.2%.
Fully understandable, this shock sends investors into panic, with the highly negative moods making an unpleasant surprise for European traders. Futures on major stock indices point to heavy losses.
UKX: 7,268 -114 points
DAX: 12,207 -236 points
CAC: -101 points
At the same time, in the FX zone, the Japanese yen is heavily favored by the surprise events, followed by the dollar and the franc. In general, there is a risk-off set-up, with USD/JPY down 52 pips down to 110.58, while risky currencies take a hit, with AUD, NZD and CAD the biggest losers.
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