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The Friday Market Minute

  • Global stocks tumble as President Trump re-escalates the U.S.-China trade dispute with threat to apply tariffs on $300 billion worth of China-made goods.
  • Officials in Beijing vow to retaliate with "counter measures" on Trump's tariff threat, but appear to hold the yuan under the 7 threshold against the U.S. dollar over the Friday session.
  • Trump will also make a statement on European Union trade today at 1:45 Eastern time amid speculation he could apply fresh levies on auto imports.
  • Asia stocks slide, with the Nikkei falling more than 2%, while Germany's trade-sensitive DAX index leads European markets lower with a 2.4% slump.
  • Oil prices lurch higher following yesterday's 7% collapse, the biggest single-day decline in more than three years, as investors re-set expectations for world demand amid concern that tit-for-tat tariffs will damage growth prospects.
  • U.S. equity futures suggest extended declines Friday, with the Dow called 83 points lower and the S&P looking at an opening bell dip of 15 points.

Market Snapshot

U.S. equity futures extended declines into a third consecutive session Friday after President Donald Trump shocked markets with a move to apply further tariffs on $300 billion worth of China-made goods just hours after expressing further disappointment with the Federal Reserve for failing to signal deeper interest rate cuts.

Stocks were further pressured by a July payroll report that showed employers added 164,000 new jobs last month, a figure that was largely in-line with analysts' forecasts but not nearly strong enough to suggest an economic upturn nor weak enough to trigger near-term support from the Fed.

"The in-line July jobs report doesn't really change the macro outlook much. But equities have other problems - they're being squeezed by a double whammy. On the one hand, Wednesday's Fed outlook was less dovish than hoped, while President Trump's latest consumer-focused China tariffs significantly dented the already soft global growth outlook," said Alec Young, managing director of global markets research at FTSE Russell. "So just when investors need a Fed backstop most, it seems less reliable."

"That combination clouds future earnings visibility and squeezes valuations. The bottom line is there's nothing in the July jobs report to breathe new life into the stock market," he added.

U.S. equity futures suggest further declines on Wall Street this morning, with contracts tied to the Dow Jones Industrial Average indicating a 50 point decline, adding to the more than 500 points the benchmark has lost since Wednesday, while those linked to the S&P 500 are guiding for a 14 point opening bell decline.

China's Foreign Ministry vowed to take "counter measures" on the Trump tariff decision, which is set to apply from September 1, suggesting Beijing is prepared to dig in for a protracted trade battle that could both slow global growth prospects and disrupt financial markets. 

Investors were further rattled by news that Trump will make a statement regarding trade with the European Union today at 1:45 Eastern time, a schedule that comes amid previous threats from the White House to use a national security pretext to apply tariffs to European made cars sold into the United States.

Asia markets tumbled Friday, pulling the Nikkei more than 2% lower in the session as the yen surged in safe-haven trading and government bonds yields around the world fell sharply as investors ran for cover from the fallout of Trump's grim assessment of U.S.-China trade talks.

"When my people came home (from this week's talks in Shanghai), they said, 'We're talking. We have another meeting in early September.' I said, 'That's fine, but until such time as there's a deal, we'll be taxing them," Trump told reporters yesterday in Washington.

European stocks were also heavily in the red in the early Friday session, with the Stoxx 600 falling 1.9% and Germany's trade-sensitive DAX performance index collapsing 2.4% as auto stocks tumbled ahead of Trump's statement later today.

Germany's benchmark 10-year bund yields, a proxy for risk free borrowing rates in the Eurozone, fell to a fresh record low of -0.529% in overnight trade, while 10-year U.S. Treasury notes traded at 1.855%, the lowest since September 2016.

Bond investors will also have to navigate today's July employment report, which is expected to show U.S. employers added 164,000 new jobs last month, a move that is likely to hold the headline unemployment rate unchanged at 3.7%.

"If the job numbers are strong, it will lessen pressure on the Fed to cut rates further," said  Putri Pascualy, Managing Director for PAAMCO Prisma. "Wednesday's statement from Chairman Powell put some cold water on the market's expectation of further rate cuts and a strong job number may further put credence on that statement - potentially bringing further retractions in the equity market."

"The recent news on tariffs is likely to add to market jitters, which may further put pressure on equities but support assets such as Treasuries and US dollar," he added.

Global oil prices lurched higher Friday, after falling the most in more than three years yesterday amid concern that Trump's tariff decision would damage growth prospects in China and sap demand in the world's biggest energy market.

Brent crude contracts for September delivery, the global benchmark, were seen $1.53 higher from their Thursday close and changing hands at $61.49 per barrel while WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked $1.27 higher at $55.22 per barrel.