Pre-Market Update: Asian Stocks and Euro Off to Bad Start This Week

New data shows that the US-China trade dispute is starting to affect the Chinese economy.  On Saturday, China released its purchasing manager index (PMI) readings and the data shows it tumbled into contraction in June.

This is an important leading indicator of future exports.  Moreover, it is the clearest sign yet that the oncoming trade war is having a real, negative impact on growth.

Indeed, things are likely to get worse in the near term as tariffs between the US and China are set to take effect this Friday.  This sent stock markets across Asia into a tailspin.

  • The Shanghai Composite led the way down with a hefty 2.52% drop.
  • Japan’s NIKKEI 500 Index also fell 2.0%.
  • South Korea’s KOSPI Index fell 2.35%.
  • India’s Sensex Index dropped a modest 0.81%.

The recent pick up in market volatility and declining economic data is increasing pressure for a solution to the brewing trade war.  However, there are as of yet no signs of a negotiated solution on the horizon.

Euro Falls and European Stock Markets Struggle as Political Uncertainty Comes Roaring Back

German Chancellor Angela Merkel is suddenly politically vulnerable.  German Interior Minister Horst Seehofer rejected a migration deal Merkel negotiated at a European Union summit on Friday.  Seehofer is chair of the Christian Social Union (CSU) party — which is the junior partner in Merkel’s government.

This raised the possibility that Merkel’s government might be weakened.  Seehofer has apparently offered his resignation as Interior Minister and chair of the CSU.

The ensuing political uncertainty knocked the Euro down about 0.43% as I write this.  On top of that, European stock markets also reacted negatively to the news.

The German DAX Index is down 1.13%.  The French CAC 40 Index tumbled 1.37%.  Finally, London’s FTSE 100 Index is also down about 1.12% on the news.

The bad news from abroad is pulling down US futures.  The S&P 500 is down about 0.66% currently.  Get ready for a bumpy ride in the markets today.

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Al Basoglu

I am a financial services professional with over a decade of experience in various roles. I've lived and worked abroad in 5 different countries while pursuing personal and professional challenges. My interests include markets, history and different cultures. I tend to weave all of my interest into my analysis and articles.