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It’s Risk-Off as Trump Turns the Screw Tighter Against China


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The major U.S. stock indices are trading sharply lower early Monday after President Donald Trump said on Sunday that the United States will hike tariffs on goods imported from China. The news prompted China to consider canceling trade talks, which quickly drove down demand for higher risk assets, while driving investors into safe-haven assets like gold, Treasurys, the Japanese Yen and the U.S. Dollar. Based on the early price action, clearly the events are generating a "risk-off" tone.

At 01:04 GMT, the benchmark June E-mini S&P 500 Index is trading 2886.25, down 61.50 or -2.10%. The blue chip June E-mini Dow Jones Industrial Average is at 25963, down 537 or -2.05% and the June E-mini NASDAQ-100 Index is trading 7676.00 down 189.00 or -2.43%.

The traditional safe-haven assets are also responding to the news. Treasury yields are falling with June 10-year Treasury Notes soaring to last week's high at 124'02. The 30-year Treasury bonds are also trading sharply higher, hitting their highest level since April 1.

More evidence of safe-haven buying can be seen in the Dollar/Yen Forex pair, where strong demand for the Japanese Yen is triggering a steep break in the USD/JPY . The market is trading 110.435, down 0.667 or -0.60%.

Safe-haven buyers are also driving the U.S. Dollar higher against a basket of currencies, while investors seeking safety are also buying gold, sending June Comex gold futures to $1285.00, up $3.70 or +0.27%.

Trump Tweet Triggers Turmoil

The reaction in the financial markets was swift and decisive after President Trump said in a tweet Sunday afternoon that the current 10% levies on $200 billion worth of Chinese goods will rise to 25% on Friday. He also threatened to impose 25% tariffs on an additional $325 billion of Chinese goods "shortly."

Furthermore, although trade negotiations between Washington and Beijing officials are set to resume on Wednesday, the president lamented that the progress is moving "too slowly" as China tries to re-negotiate terms of the deal.

Sources Say China May Cancel Trade Talks

According the Wall Street Journal, China is responding to Trump's latest tweets by threatening to cancel its trade talks with the U.S. this week. Citing a source, the Journal said Beijing had been surprised by the new threats.

CNBC followed up by saying that two sources briefed on talks confirmed that news to CNBC. The Chinese may back out of negotiations this week after Trump's escalated tariff threat, they said, abandoning a six-month truce after Beijing waffled on some previously discussed commitments.

Once CNBC source said Chinese Vice Premier Liu He will likely cancel the trip he'd planned for himself and a 100-person delegation for a final round of talks. A second source said Trump's decision to more than double the tariff rate on $200 billion of goods was meant to send a message to Liu not to come to the U.S. with more "empty offers."

This article was originally posted on FX Empire

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This article appears in: Investing , Bonds , US Markets , Gold , Commodities , Currencies
Referenced Symbols: SPX



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