Seemingly escalating global trade tensions sent financial markets into fresh turmoil on Wednesday.
Gold benefited from the flight to safe havens. Spot gold rebounded 0.6% (+$8) to $1,340/oz. It traded as high as $1,347 earlier in the session.
Concerns about how trade skirmishes could negatively effect industry dampened prices for silver and the PGMs, however.
Silver slipped 7¢ (-0.45%) to $16.32/oz. Platinum and palladium were both off sharply, trading in parity at $913/oz.
Full-Blown Trade War? Or Negotiating Strategy?
Markets had a panicked reaction to rapid developments in the brewing trade war between China and the U.S.
Trade representatives from each country released, in quick succession, formal lists of goods that could be targeted for significantly higher tariffs.
The U.S. list included some 1,300 items, ranging from TVs and machine tools to chemicals, medicine, and medical equipment. China swiftly hit back less than 12 hours later, announcing its own list of key U.S. exports like soybeans, planes, whiskey, and tobacco.
While this would seem to be an aggressive move by both sides, it's all negotiable. There will be months of public comment before any of the proposed tariffs come into force.
If both countries followed through, economists worry that it may adversely impact the broader economy—both domestically and globally.
There are concerns that the rising national debt and budget deficit in the U.S. could start to drag on economic growth, as well.
Nonetheless, these "tariff lists" are probably more about strategy and leverage than definitive policy.
China seems to be mirroring President Trump's more transactional style to international trade. This creates the distinct possibility of securing better terms to any trade deal.
Trump has called for China to cut, though not necessarily eliminate, its $375 billion trade surplus with the U.S. by at least $100 billion. He has also raised issue with the theft of U.S. intellectual property by Chinese companies.
Equities Dive Yet Again, Commodities Tumble
European indices pared earlier losses but were still in the red. Asian markets were a mixed bag: shares closed down 0.2% in Shanghai and slightly in the green in Japan, but Hong Kong's benchmark Hang Seng index slumped over 2%.
In the U.S., the Dow Jones led the way 1.4% lower at the open, falling below 24,000 again. The S&P 500 and Nasdaq were each down about 1%.
The dollar remained steady, although it hasn't gotten much of a boost from rising interest rates. The DXY index was trading at about 90.0 after inching higher yesterday.
The euro advanced 0.3%, trading back above $1.23. China's yuan (renminbi) dipped 0.2% to 6.3 per dollar in offshore trading.
Stocks were actually coming off a rebound on Tuesday: all three U.S. indices surged in the late afternoon, closing up more than 1%.
Those gains were essentially erased in the first hour of trading Wednesday.
Commodities followed a choppy session on Tuesday with big losses this morning. Both crude oil benchmarks were off almost 2%. Brent crude dropped below $67/bbl. Copper prices sank 2.5% to below $3 per pound. Soybean futures tumbled about 5% on the tariff news.
The 10-year Treasury was largely steady at 2.76% after rising nearly five basis points yesterday.
Looking Ahead: What to Watch For
ADP's monthly payrolls data for March indicated that 241,000 jobs were added. The report foreshadows Friday's nonfarm payrolls from the Labor Department, which is considered the more reliable measure.
Weekly jobless claims will be released tomorrow.
It's also a busy week of Federal Reserve officials offering public commentary. Minneapolis Fed President Neel Kashkari spoke yesterday morning; St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester will speak today; and Fed Chair Jerome Powell gives a speech on Friday.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.