U.S. equity futures slumped, European stocks tumbled and Asian markets were in freefall on Monday, after China finally struck back in its trade dispute with America, letting its currency plunge below the key psychological level of 7 vs the USD.
This unexpected escalation by Beijing, which sent the Yuan to a level last seen in 2008, spooked a selling panic across global risk assets, sending the S&P below 2,900, and world markets in a sea of red...Earlier in the session, Asian shares suffered their steepest daily drop in 10 months, with MSCI’s broadest index of Asia-Pacific shares outside Japan sinking 2.5% to depths not seen since late January. Japan’s Topix tumbled 1.8% to lowest close since Jan. 4 as the yen surged. Hong Kong’s Hang Seng Index lost 2.9% after protesters moved to shut down the city with a general strike. The Philippines’ benchmark was the region’s worst performer, dropping 3%. Investors moved to risk-off mode as the U.S.-China trade war escalated after U.S. president Donald Trump ratcheted up rhetoric by saying that he could boost levies on China to a “much higher number.” To counter the threat, China asked state-owned enterprises to suspend imports of U.S. agricultural products. South Korea’s Kospi Index declined 2.6% as the won weakened below 1,200 to the greenback for the first time since Jan. 2017.
And with S&P futures were down 1.4%, sliding below 2,900, the VIX index rose to 21.2%, its highest since May 9, while Europe’s equivalent hit its highest since early January.
Developing-nation stocks fell for a ninth day, the longest streak of losses since December 2015. “There is probably more pain to come for EM currencies” given the unwinding of carry trades, reduction in growth exposure through equities and build-up in speculative wagers, Jason Daw, the Singapore-based head of emerging-markets strategy at Societe Generale SA, wrote in a report. “The strong policy signal by China has put the renminbi back in the driver’s seat; it will be a leader in the global currency cycle for the foreseeable future.” Sterling hovered near 2017 lows at $1.2117, pressured by concerns about Britain exiting the EU without a trade deal in place.
Market Snapshot
- S&P 500 futures down 1.3% to 2,894.00
- STOXX Europe 600 down 2% to 370.54
- MXAP down 2% to 152.42
- MXAPJ down 2.5% to 491.47
- Nikkei down 1.7% to 20,720.29
- Topix down 1.8% to 1,505.88
- Hang Seng Index down 2.9% to 26,151.32
- Shanghai Composite down 1.6% to 2,821.50
- Sensex down 1.4% to 36,616.90
- Australia S&P/ASX 200 down 1.9% to 6,640.30
- Kospi down 2.6% to 1,946.98
- German 10Y yield fell 2.2 bps to -0.517%
- Euro up 0.3% to $1.1140
- Italian 10Y yield fell 3.9 bps to 1.19%
- Spanish 10Y yield fell 2.2 bps to 0.224%
- Brent futures down 1.3% to $61.11/bbl
- Gold spot up 1.2% to $1,457.46
- U.S. Dollar Index down 0.2% to 97.87
Major European bourses have begun the week firmly in negative territory [Euro Stoxx 50 -1.4%] following on from a downbeat Asia-Pac handover after market sentiment took a hit from dwindling trade hopes as China asked state-run purchasers to halt US farm goods imports.
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