US stocks deepen decline, NFP report meets estimates

Summary

- Global stock markets sink on trade war escalation
- NFP report met estimates in terms of employment change, wage growth above estimates
- Oil sees strong gains but barely recoup half of yesterday’s decline
- JPY and CHF outperform while AUD, NZD, NOK and CAD drop on trade uncertainty
- Declines on the industrial metal market

Donald Trump announced yesterday a new 10% tariffs on $300 billion of Chinese goods that  have not been subject to other levies yet. The announcement sent shockwaves through the global financial markets and caused real carnage on the stock markets all over the world today. Steep declines were seen during the Asian trading hours, followed by even deeper declines during the European session. US indices are also experiencing over 1% declines already and may drop even further.

Escalation of the US-China trade war cause risk appetite to abate. In turn, one should not be surprised by the fact that the Japanese yen and Swiss franc are the best performing G10 currencies today. Other safe havens, like for example gold, fail to rally on the increased uncertainty as relatively strong USD holds them in check. Commodity currencies like Norwegian krone, Canadian dollar, New Zealand dollar and Australian dollar are among the worst performing majors today.

The key event of the day - NFP report release - turned out to be a non-event as the employment change met estimates. Wage growth was faster than expected but not fast enough to distract the markets from the fact that US-China trade talks may collapse any minute if they have not already.

Taking a look at the commodity market, one can see that oil stands out. Both grades of crude are trading 3% higher today. However, it should be noted that oil market saw one of the steepest declines yesterday and today’s gains recoup barely a half of yesterday’s decline. Agricultural commodities trade mixed with wheat and corn prices moving higher and sugar and cotton being quoted significantly below yesterday’s closing prices. Industrial metals trade lower all across the board.

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