Stocks swoon on Chinese tariffs; Powell next

Summary:

• China announce new round of tariffs on US products

• US markets to start lower by around 1%

• Powell speech due shortly - 3PM (BST)

There’s been a swift move lower in US futures ahead of the US open after China announced a new round of retaliatory tariffs on US products. The levies will apply to $75B of goods and range from 5-10% starting on September 1st. The most eye catching was a 10% tariff on US crude oil products, 5% on soybeans and the resumption of 25% tariffs on US autos from December 15th.

The US500 fell by 30 points or 1% in just a matter of minutes after the latest tariff news broke. Source: xStation

We were expecting heightened volatility today, but this news has come ahead of the main scheduled event with Fed chair Powell due to speak at 3PM (BST). With the G7 meeting also taking place this weekend the timing of this news from Beijing looks calculated to have the biggest impact and Trump has already taken to social media, wasting little time to heap more pressure on Powell’s with a tweet that read “Now the fed can show their stuff”.

While there’s little doubt that Powell’s speech is the main event this afternoon, we’ve also had some comments from Fed member Bullard who has made the following remarks:

• There will be a robust debate about 50 bps cut at next meeting 

• Fed has to react to the global downdraft in yields

• Lower rates would help US power through churning waters of trade war

• Our job is to get the yield curve uninverted

This is clearly dovish rhetoric but has been usurped by the China news and traders now await Powell.

US stocks remain in a consolidation phase with 2945 still key resistance. Recent lows around 2894 could be seen as important support. Source: xStation