Largest Trade War in History begins

Daily Analysis - 06/07/2018

Tariffs come into play

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The U.S. imposed trade tariffs with $34 billion onto China as of midnight Washington time today. Markets had already price this in so were remarkably calm today. This is perhaps because the harm to the global economy is manageable for now and not so big. The question is that if there are further tariffs down the line, this could start having an impact.

European stocks higher


As the U.S. tariffs went into effect, China responded with their own tariffs on some imports from the U.S., also worth $34 billion in annual imports. This tit-for-tat action was expected by the markets and European stocks actually opened higher this morning. The Euro Stoxx 600 and Euro Stoxx 50 opened higher, as well as other stocks such as Frankfurt DAX and CAC 40.

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NFP Friday


The market focus turns to the all-important jobs report out of the United States later today. Between 190k and 195k jobs are expected to have been created in June - down from 223k last month. The wage component is the most important number to watch because it is the leading indicator of US inflation. This will be the main driver of the U.S. dollar as attention is shifted away from the trade tariffs for now. USDJPY has been moving to the downside this morning.

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WTI oil slides after data  


Crude oil fell back after the EIA inventory report yesterday and is testing the key $73 a barrel level. The data showed an increase of 1.2m barrels from the previous week. The number had a negative impact on oil prices because a drawdown of -4.4m barrels was expected.

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