(11 JULY 2018)DAILY MARKET BRIEF 1:Risk aversion spreads amid renewed trade tension

(11 JULY 2018)DAILY MARKET BRIEF 1:Risk aversion spreads amid renewed trade tension

11 July 2018, 14:55
Jiming Huang

Asian equities fell across the board on Wednesday after Donald Trump announced tariffs on a further $200bn in imports from China. The Nikkei 225 gave up 1.19% to 21,932 points, while Chinese stocks bore the brunt of the sell-off. The Shanghai Composite fell 1.76%, while the tech-heavy Shenzhen Composite slid 1.96%. European equities followed the lead and moved in negative territory. The German DAX already gave up more than 1%, the Eurostoxx 50 fell 0.85% while the SMI erased 1%.

The Trump administration unveiled a new list - which includes a broad range of products ranging from electric vehicle batteries to air conditioning machines - of Chinese products that will be hit with a 10% tariff. The list is not definitive yet and is expected to come into effect in September. China already declared the new tariff were “totally unacceptable” and promised it will retaliate dollar-for-dollar.

In the FX market, the announcement triggered a risk-off reaction, which translated into a sell-off in emerging market currencies, and a broad US dollar appreciation. Safe-haven currencies such as the Swiss franc and the Japanese saw limited but were at least able to hold ground. In the EM complex, the Russian ruble and the Turkish lira suffered the most as they both fell 0.50%. The Chinese yuan slid 0.48% with USD/CNH rising to 6.6815. Finally, the currencies of export-oriented countries also felt the pain. The Australian dollar fell the most within the G10 complex as it erased 0.65% to $0.7410.

By Arnaud Masset

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