Markets remain rattled that the tariff man is coming on Friday

Trade talks will go on as planned, but expectations are low for enough progress to derail President Trump’s promise to raise current tariffs of 10% on $200 billion of Chinese goods to 25%. Trump’s deadline of Friday is delivering a see of red to risk assets.  US equities are down over 1% across the board with the Nasdaq leading the way lower with a 1.5% decline.  The market still believes a trade deal will get done in due time but uncertainty of enough progress for this week’s deadline is putting a dent in risk appetite.

RBA – No Cut, No Easing Bias

EUR – Sinks as EU forecasts catch up to the street’s view

Stocks – Trade worries linger 

Oil – Down on trade worries

Gold – Not much of a safe-haven

EUR

The euro sank to the lows of the day after the EU Commission released the Spring Economic Forecasts.  Playing catch up to the street’s views, EU growth now seen at 1.3%, with Germany now expected to only see 0.5% growth in 2019.  The key takeaway is that downside risks to the outlook remain prominent.  Hurting the outlook are Brexit risks, trade wars and continued softer than expected data from Germany.

RBA

The Reserve Bank of Australia (RBA) rate decision decided to hold rates steady in hopes the labor market will drive the growth with inflation.  The Bank is still expected to deliver a cut this year, but they may wait a couple meetings before doing so.  The Australian dollar jumped almost 50 pips following the statement release but the gains were short-lived as the overall risk-off market environment put a damper on high-beta currencies.  The RBA meeting did not deliver a rate cut, not a explicit easing bias, so we could see markets need to see further softer Australian data points before seeing downward momentum accelerate.

Stocks

US stocks are having a broad-based selloff on escalating trade concerns.  The rebound in Asia was short-lived as the market reprice the optimism for enough trade progress to derail Trump’s tariff threat.  Skepticism is high that enough progress will not be made by the Friday deadline and fears are growing that the trade war might drag into 2020.  If we see the US increase tariffs at the end of the week, China will retaliate, and global growth will take a big hit.

A wrath of negative headlines earlier in Europe did not help with risk appetite.  EU Commissions Spring Forecast downgrades further detailed softness in the region and the release of German factory orders showed the fifth straight miss with the consensus expectations.

The US stocks markets are all trading down by around 1.5%, with the Nasdaq leading the way lower with a 1.7% decline.

Oil

Risk aversion is dragging commodities lower, but the move may be overdone with crude prices.  Geopolitical risks are likely to provide some support for oil prices and the focus is likely to shift back to Iranian sanctions, Russia’s pipeline disruption, Venezuelan falling exports and the Libyan conflict.

West Texas Intermediate crude appears to still see technical buying ahead of the $60 a barrel. If we see crude stabilize here, initial resistance will come from the $63.50 region.

Gold

A see of red with global stock markets is still not good enough of a catalyst to drive a strong move higher with gold prices.  The precious metal remains capped by $1,290 and that is surprising considering the amount of risk aversion flows global markets are seeing.  Gold is poised for its third consecutive daily gain, but the move is unimpressive and will not gain the attention of momentum traders until we see a recapturing of the $1,300 level.

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