June 26, 2018, by Lorcan Roche Kelly
White House trade adviser Peter Navarro said that a Treasury Department report later this week on American restrictions on foreign investment won’t be as broad as investors fear as he sought to allay a trade standoff. His words came after increasing worries that the world is heading for a full blown trade war sparked a global market selloff yesterday. Worldwide supply chains mean companies have had to change how they’re doing business to heed measures already in place.
Financial markets in China are suffering a double whammy of trade tensions and a domestic campaign to deleverage, providing a raft of sell signals. The Shanghai Composite Index entered a bear market, ending today’s session 20 percent below its January high with analysts seeing little reason to expect a rebound any time soon. The yuan was fixed at a reference rate of 6.518 per dollar, slightly stronger than expected, which may point to efforts by authorities to stem the currency’s weakening.
House Republicans are set to present a compromise immigration bill tomorrow, with no certainty yet as to whether they can get it past the more conservative members of the party. The current version has added a requirement for employers to electronically check the immigration status of workers in an attempt to win over those key votes. Meanwhile, on the border, the patrol agency head said that separation of families has stopped.
Overnight, the MSCI Asia Pacific Index fell 0.1 percent while Japan’s Topix closed 0.2 percent higher, recovering from losses of more than 1 percent earlier in the session. In Europe, the Stoxx 600 Index was 0.3 percent higher by 5:50 a.m. Eastern Time as stocks rose on the back of a weakening euro. S&P 500 futures pointed to a quiet open, the 10-year Treasury yield was at 2.882 percent and gold was dropping.
Goldman Sachs Group Inc., Citigroup Inc. and Morgan Stanley have all shown bearish sentiment towards emerging markets, with trade threats and a rising dollar cited as some of the biggest risks to the asset class. EM currencies were again hit yesterday, suffering their worst Monday since August 2016. The uncertainty adds to the challenges facing Turkey’s newly re-elected president, who enjoyed a post-victory market rally of less than one day.