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Stock markets opened lower on tuesday as investors eyes shifted from last week's Federal Reserve policy statement to President Trump hitting China with threats of another $200 billion in tariffs. Shanghai markets were routed with over 1000 stocks falling 10%.

China U.S. Investment

With markets already vulnerable to rising rates, trade war talk following the recent G7 and NAFTA failure investors didn't need more reasoons to exit. We saw money flee stocks into bonds with the fear magnet 10-year Treasury note.

US Markets Open Lower

  • S&P 500 -19.43 points at 2754.33 after low of 2747.04
  • Nasdaq 100 -54 points at 7692.after low of 7657.55
  • Dow  -301 points at 24679 after low of 24644.
  • WTI crude oil - $1.26 at 64.75 (July) or over -1.85%
  • US yields  low levels now: 2 year 2.532%, -1.6 basis points 10 year 2.889%, -2.7 basis points 30 year 3.025%, -2.3 basis points

Trumps's latest threats came after U.S. markets closed with China’s benchmark equity gauge falling neart 5 percent at one point and by the close 1,023 stocks down by the daily 10 percent limit. That is more than one in four, or over twenty five percent. The benchmark Shanghai Composite Index’s fell below 3,000, a level that gave away during the market crashes in 2015 and 2016.

The threatened tit-for-tat trade war over import tariffs is causing panic in not just China bit in the whole region. The Australain dollar is down over 250 pips in just 4 trading days and the key AUDJPY double that. Australia is the U.S.'s closest ally and also China is one of the countries major trading partners. Australian leaders can not be happy with the U.S. President and his trade game.

Should a trade war spin China’s economy lower the fallout will be immense and jsut last week selling picked up in Shanghai with some concerning Chinese economic data. Throw in rising corporate defaults and the government’s financial deleveraging campaign and sentiment is retched.

Lets hope there is a game plan here with China on Tuesday saying it will retaliate "forcefully" after President Donald Trump threatened duties on $200 billion in Chinese imports, and another $200 billion after that if Beijing retaliates. The fallout will be devastating. Remeber it was less than a month ago that both nations said they were putting their trade war on hold. These past few days gives investors little comfort in the hot air out of the two nations.

LAst nights threats came after last week’s publication of the U.S.’s final list of $50 billion in tariffs, and China’s statement over the weekend that all recent agreements on trade would become void.

China's stock market has serious issues it still hasn't recovered from the $5 trillion collapse that started almost exactly three years ago. The U.S. stock markets are mostly within striking distance of record highs.

The Shanghai Composite is actually one of the world’s worst performing benchmarks this yearn 2018. Almost 80 percent of the Chinese index’s stocks closed at fresh four-week lows on Tuesday.

The Shanghai Composite Index trades at less than 11 times projected earnings, its cheapest relative to global shares since early 2015, but future earnings are noiw a mystery. What is shocking to many is how Trump has been so forceful so quickly after what seemd a good result after the Singapore summit and the Chinese government’s favorable monetary policy. From the outside it looks like all these nations called Trump's bluff and it turns out he wasn;t and actually has upped the ante. From here is their compromise or a fullon trade war? We understand the rationale is this is just part of makin a deal, but is it?

The biggest hits in the DJIA were to American exporters and conglomerates. Caterpillar $CAT, Boeing $BA, 3M $MMM and JPMorgan $JPM were all down big.

Chinese stocks were hit also Alibaba $BABA NetEase $NTES Baidu $BIDU, part of the Nasdaq 100, lost over 3%. 

Source: Reuters, ForexLive

From The TradersCommunity News Desk

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