Stocks tumble as trade tensions escalate
DE30: Wirecard sinks on new interest from prosecutors
Peso swoons after Trump move
USD barely reacts to PCE print
There’s been further weakness seen in equities this morning as global stock markets appear to be finally waking up to the elephant in the room that is the renewed escalation of tensions on the trade front. With Trump threatening to slap tariffs on all US imports from Mexico unless it steps up efforts to stop illegal migration, it is becoming ever more apparent that the US president sees tariffs as a valuable geopolitical bargaining chip that he is more than willing to throw around in pursuit of his goal.
The US president has also ramped up his attack on Huawei by promising to limit intelligence sharing with Britain if the UK allows the firm to build part of its 5G mobile network and hopes for a swift resolution to the US-China trade tensions are fading fast. Markets have been relatively sanguine to the latest developments on the trade front, but the growing realisation that this isn’t simply a posturing tactic, intended to get a better deal when an agreement is reached is causing rising concern for investors.
The S&P500 is lower by over 1% at the time of writing, with the market threatening to close below its 200 day SMA for the first time since the start of March. The Mexican Peso is down by 2.5% against the US dollar.
Wirecard (WDI.DE) is one of the worst performing DAX members on Friday morning. Apart from increase in risk aversion, the stock seems to be also pressured by the Handelsblatt report. The German business newspaper that company is seen by prosecutors as payment processor for scandal-involved FX broker, Option888. Wirecard responded saying that it performs due diligence to all of its clients and terminates all relationships that do not conform to legal, regulatory or internal rules.
The US PCE inflation data was released this afternoon and it was the final noteworthy reading scheduled for this week. There were some concerns prior to the release as yesterday’s revised GDP report showed an annualized pace of price growth of just 1%. Today’s reading showed that the Fed's preferred measure of inflation reached 1.6% YoY in April. The reading was in line with expectations and in turn we did not see much of a price reaction.