The new trading week has started with Asia Pacific markets catching up to last Friday’s panic selloff. Hong Kong plunged 13.2%, Shanghai fell 7.3%, and Tokyo lost 7.8%. European markets, which partly participated on Friday are seeing less extreme losses with Frankfurt down 4.2% and London down 3.8%.
All eyes are now on the US to see if markets there will resume last week’s selloff or stabilize. When index futures trading opened last night, US contracts were down about 5%. This morning finds US index futures down 2.5% to 3.2%. Over the weekend, anecdotal reports suggested a number of smaller countries have called the US to talk about cutting tariffs, but for now, investors appear to be focused on what the response may be from the European Union, United Kingdom, Canada and others. It also remains to be seen whether this selloff has been enough to force the Fed to take supportive action or not.
A look at other asset classes shows a number of key technical levels being tested with mixed success. The US 10-year treasury note yield has stabilized near 4.00% after dipping below that on Friday. Crude Oil is down 2.8% trading just above $60.00/bbl after dipping below that level overnight.
Friday’s widespread dumping of everything appears to be ending and selective support resuming particularly in defensive markets. Silver is up 2.9%, and Gold is up 0.4%. Meanwhile, Bitcoin is down 2.4% and has broken down below $80,000, and Copper is down 3.6%. The Loonie is down 0.4%, the Pound is down 0.6% and the Euro is steady.
This week’s economic calendar is light, headlined by inflation reports for the US and China, but these may be overshadowed by developments in the tariff war. Meanwhile, some of the focus may start to turn to corporate guidance as earnings season kicks off on Friday with several big US banks scheduled to report results.