China trade war

Asian shares stumbled in holiday-thinned trading on Monday as China’s decision to cancel talks with the United States reinforced fears of a protracted trade war with neither side willing to back down. Investors were squarely focused on the Sino-U.S. trade war as China added $60 billion of U.S. products to its import tariff list, retaliating against U.S. duties on $200 billion of Chinese goods that came into effect. China also cancelled mid-level trade talks with the United States, as well as a proposed visit to Washington by Vice Premier Liu He originally scheduled for this week. The United States, meanwhile, does not have a date for further talks. The intensifying dispute between the world’s two biggest economies has spooked financial markets worried about the fallout on global growth. Both the U.S. and China are digging in, and increasingly the subtext seems to be as much about advancing a trade ideology as it is about rescinding trade tariffs. Chinese Premier Li Keqiang said over the weekend China will cut import and export costs for foreign firms as it looks to promote an image of being open for business.

The EUR/USD eased from a three-month peak on Monday to last trade at 1.1739 while created an inverted hammer on Friday, as the weaker-than-expected September Eurozone PMI readings pushed the US-German yield differentials to new highs. Regarding GBP/USD, fell as much as 1.4 percent on Friday, its biggest one-day percentage loss since June 2017. It was last at 1.3076, slightly above Friday’s 1.3053 which was the lowest since mid-September, while on Friday, British Prime Minister Theresa May said talks with the European Union had hit an impasse after the bloc’s leaders rejected her “Chequers” plan without fully explaining why.

In commodities, regarding Gold with risk sentiment soaring there has been very little demand for Gold and when factors in the fact that Gold traditionally trades poorly ahead of anticipated Fed hike, the USD will have up ground to entice buyer back to the market. Regarding Oil, prices gained as OPEC’s leader Saudi Arabia and its biggest oil-producer ally outside the group Russia effectively rebuffed U.S. President Donald Trump’s calls for action to lower prices.

For today the main economic calendar activity is the ECB President Draghi speech.