Asian stocks rise as new US-China tariffs kick off
Asian stocks and European futures moved slightly upwards, amid the growing tensions on trade. Over the weekend, US tariffs on Chinese goods worth more than $125 billion went into effect. The new tariffs make the likelihood of having a deal more difficult. In the past, China has called for the US to get rid of the tariffs as a precondition for talks. Still, evidence of the impact of the trade conflict was visible in China. On Saturday, the manufacturing PMI data was 49.5, which was lower than the consensus estimate of 49.7. A PMI reading of below 50 is usually a sign that activity is weakening. The non-manufacturing PMI rose slightly to 53.8 from the previous 53.7. However, the PMI reading from private company Caixin was 50.4, which was slightly higher than the expected 49.8.
The euro was relatively unchanged as the new month began. Today, the market will receive important PMI data from the EU and most European countries. The German manufacturing PMI is expected to remain unchanged at 43.6. In France, it is expected to remain unchanged at 51.0 while in Italy, it is expected to remain unchanged at 48.5. In the United Kingdom, the PMI is expected to rise slightly to 48.4 from the previous 48.0. In the EU, the PMI is expected to remain unchanged at 47.0. Over the past few months, signs of weakness in Europe have been clear. This is mostly because of increased regulations, Brexit, and the impact of the overall trade conflict.
The dollar index was unmoved today as US tariffs continued. This week, the biggest data from the market will be that of the US employment. Economists who were polled by Reuters estimate that the US added more than 159k jobs in August. This will be slightly worse than the 164k jobs that were created in July. The unemployment rate is expected to remain unchanged at 3.7%. There are signs that the labor market is starting to weaken especially with the new tariffs. Unlike the previous round of tariffs that affected companies, this round will affect companies directly.
The EUR/USD pair rose slightly in the Asian session. The pair is trading at 1.0990, which is slightly higher than the previous low of 1.1.0962. On the hourly chart, this price is slightly below the 14-day and 28-day moving averages. It is also between the lower and the middle lines of the Bollinger Bands while the RSI is slightly above the oversold level of 30. The pair will likely move in either direction ahead of the PMI data from the European Union. The volumes will be lower because the US market will be closed.
The USD/JPY pair declined to a low of 105.90 in reaction to the US and China tariffs. The pair then pared some of those losses and is currently trading at 106.25. On the hourly chart, the price is slightly lower than the middle line of the Bollinger Bands while the RSI has remained at the neutral level of 50. The price is also between the envelope indicator. The pair will likely continue moving upwards to test the important resistance of 106.50.
The GBP/USD pair declined and then pared back those losses. The pair is trading at 1.2158, which is slightly higher than the day’s low of 1.2113. On the hourly chart below, this price is along the 50% Fibonacci Retracement level and slightly below the 14-day and 28-day moving averages. The RSI has remained being unchanged at the current level of 46. The pair will likely resume the downward trend, with the next support being 1.2125, which is the 38.2% Fibonacci Retracement number.