Asian stocks fell, gold rose, Aussie dollar declined; Key events to watch for this week 

Asian stocks fell alongside U.S. equity futures and the yen spiked as the U.S. and China engaged in a new round of trade threats. Gold and Treasuries climbed.

The steepest slides were seen in Hong Kong and China — where the Shanghai Composite Index was heading for a two-year low — after President Donald Trump warned the U.S. will slap tariffs on more Chinese goods, prompting the Asian nation to swiftly retaliate. Japanese and South Korean shares also retreated and S&P 500 Index futures extended a decline. The Australian dollar tumbled to its lowest in a year as commodity currencies weakened amid renewed concern over trade protectionism.

The world’s second-largest economy said it will hit back if the U.S. rolls out new tariffs, in response to Trump saying he has directed the U.S. Trade Representative to identify $200 billion worth of China goods for additional tariffs.

Investor concerns surrounding the implications of confrontation between China and the U.S. returned just as the Federal Reserve this month signaled a faster pace of policy tightening and the European Central Bank said it will maintain its key rate until the second half of next year. Trump says he is taking action because China has raised tariffs on U.S. exports and “has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology.”

“Will it escalate from here? We’d certainly hope not, but it’s certainly a risk,” Craig Vardy, head of fixed income in Australia for BlackRock Inc., said in an interview in Sydney. “The numbers we think at the moment are pretty small. These are just warning shots going across the bows as some of these countries try and correct some of the trading numbers.”

Elsewhere, the pound steadied as U.K Prime Minister Theresa May faces a Commons vote Wednesday that could determine the outcome of Brexit talks. Oil retreated from Monday’s gains ahead of an OPEC meeting in Vienna this week. Indonesian markets were closed for a holiday.

Here are some key events to watch for this week:

• European Central Bank President Mario Draghi speaks at ECB’s Forum on Central Banking on Tuesday.
• U.S. housing starts probably rose in May, data out Tuesday is expected to show.
• Draghi, Reserve Bank of Australia Governor Philip Lowe, Bank of Japan Governor Haruhiko Kuroda, and Fed Chairman Jerome Powell join a panel on central bank policy in Sintra, Portugal, on Wednesday.
• Thailand, Philippines and Brazil central bank decisions due Wednesday.
• Bank of England rate decision on Thursday.
• Also on Thursday: U.S. jobless claims, New Zealand GDP, South Korea export data.
• The Organization of Petroleum Exporting Countries meets in Vienna on Friday.

And here are the main market moves:

Stocks

• Japan’s Topix index fell 1 percent as of 1:06 p.m. in Tokyo.
• Kospi index lost 0.7 percent.
• Hang Seng Index dropped 2.2 percent.
• Shanghai Composite Index slid 3 percent.
• Australia’s S&P/ASX 200 Index rose 0.3 percent.
• Futures on the S&P 500 fell 0.9 percent.
• The MSCI Asia Pacific Index declined 0.8 percent.

Currencies

• The Bloomberg Dollar Spot Index slipped 0.2 percent.
• The yen gained 0.7 percent to 109.77 per dollar.
• The Aussie dollar declined 0.2 percent to 74.06 U.S. cents.
• The euro added 0.1 percent to $1.1637.
• The pound traded at $1.3268, up 0.2 percent.

Bonds

• The yield on 10-year Treasuries fell four basis point to 2.88 percent.
• Australia’s 10-year bond yield decreased five basis points to 2.62 percent.

Commodities

• Gold rose 0.4 percent to $1,283.75 an ounce.
• West Texas Intermediate crude oil lost 0.6 percent to $65.47 a barrel after rising 1.2 percent on Monday.

Source: Bloomberg – Stocks Drop, Yen Jumps on New U.S. Tariff Threat: Markets Wrap

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