Wall Street equities finished lower on Monday after California said it will extend restrictions across the state, with further escalation in the US-China trade tensions adding to the negative sentiment in the markets. The US declared most of China’s maritime claims in the South China Sea illegal. In turn, Beijing said the latest U.S. move is aggravating tensions in the South China Sea. As a result, the Nasdaq Composite closed down 2.1%, the Dow Jones Industrial Average finished nearly unchanged while the S&P 500 index dropped 0.93%.
Today in Asia, equities followed suit amid rising coronavirus cases, escalating US-China tensions, and further decline in oil prices. Japan’s Nikkei 225 fell 0.8%, Hong Kong’s Hang Seng Index slid 1.7%, China’s Shanghai Composite declined 0.9%, while Australia’s S&P/ASX 200 retreated 0.4%. On the positive side, fresh economic data out of China came in better than expected. Exports rose 0.5% in June while imports increased by 2.7% as compared to a year earlier versus -1.5% and -10.0% expected. However, the data failed to inspire stocks as investors focused on negative drivers.
European stocks opened lower as investors weighed the risks of the upcoming earnings season and economic damage from rising virus cases. JPMorgan, Bank of America, Wells Fargo, Goldman Sachs, BNY Mellon, and Citigroup start the U.S. earnings season for banks. Worries about the state of California shutting down also weighed on equities. The German DAX dipped 1.38%, French CAC 40 declined 1.56% and U.K. FTSE 100 slipped 0.33%. US index futures are pointing to a lower open as widespread risk aversion persists.
Meanwhile, EURUSD turned green on the day after an earlier dip to the 50-hour SMA around 1.1325. German inflation data came in line with expectations and didn’t affect short-term dynamics in the pair. However, the common currency managed to bounce from intraday lows despite the resurgent dollar demand amid risk-off tone. As for other data, Eurozone May industrial production arrived at +12.4% versus +15.0% m/m expected. On the positive side, the ZEW Institute said that after a very poor Q2, experts expect to see a gradual increase in GDP in 2H 2020. Later today, the US CPI report could affect EURUSD in the short term.
