Wall Street Slides as Asian Markets Tumble Amid U.S. Trade Uncertainty

By Wayne Cole

SYDNEY () - Declines in Wall Street futures pulled Asian markets down on Monday amid ongoing tensions from the latest phase of U.S. trade disputes, keeping investors cautious; however, the impact remained relatively contained due to optimism that much of the rhetoric came from President Donald Trump.

On Saturday, Trump announced his intention to implement a 30% tax on majority of goods coming from the European Union and Mexico starting August 1, despite ongoing extended talks with them.

The European Union stated it will prolong the pause on retaliatory measures against US tariffs until early August and keep working toward an agreement, although Germany's finance minister urged strong responses if the taxes proceed.

Investors have grown mostly accustomed to Trump's unpredictable approach to policymaking, with stock markets experiencing only minor declines, and the dollar rising slightly against the euro.

"it's difficult to determine if the subdued reaction from the market reflects strength or indifference," stated Taylor Nugent, a senior markets economist at NAB.

However, it is challenging to determine the range of headlines that claim to outline where tariffs will be set starting in August, as discussions are still underway.

Currently, MSCI's most comprehensive index of Asian Pacific stocks excluding Japan remained largely unchanged, whereas Japan's Nikkei declined by 0.5%.

Both S&P 500 contracts and Nasdaq contracts declined by 0.4%. This week marks the start of earnings reporting, with top banks taking the lead on Tuesday.

S&P firms are projected to see a 5.8% rise in earnings compared to the same period last year, which is lower than the previously anticipated 10.2% increase as of April 1, per LSEG IBES.

BofA analysts observed that the benchmark for profits was weak, as expectations predicted a decline to 4% growth, down from the prior quarter's 13%.

"We anticipate a slight increase of 2%, which is lower than the 3% average and the 6% from the previous quarter, although our outlook for the medium term is more positive," they mentioned in a report.

PRESSURING POWELL

In the bond market, Treasury securities saw only a slight increase due to their perceived safety, with 10-year yield rates remaining steady at 4.41%. Futures related to the federal funds rate rose slightly as investors anticipated some additional monetary policy relaxation in the coming year.

Although Federal Reserve Chairman Jerome Powell has indicated a cautious approach regarding rate reductions, Trump is increasing political pressure for stronger economic stimulation.

A White House economic advisor named Kevin Hassett said over the weekend that President Trump could potentially have justification for dismissing Powell due to increased expenses during the remodeling project at the Federal Reserve's office in Washington.

On Sunday, Trump stated that it would be beneficial if Powell resigned.

U.S. consumer price data for June will be released on Tuesday and may begin reflecting initial upward pressure caused by tariffs, although retailers continue to utilize stock purchased before the taxes were imposed, and certain businesses are covering the expenses through their profit margins.

The effect on supply chain expenses may appear in producer price and import cost data this week, whereas an update on retail sales will reflect consumer performance.

Another set of data is coming from China, beginning with June trade figures on Monday, followed by retail sales, industrial production, and gross domestic product the next day.

Of all the currencies, the euro fell 0.2% due to trade policy updates, reaching $1.1665, moving further from its latest four-year high of $1.1830. The U.S. dollar increased by 0.1% against the Japanese yen, hitting 147.53, and rose about the same percentage on its exchange rate index, reaching 98.008.

The U.S. dollar rose 0.3% against the Mexican peso, reaching 18.6900, as Mexican President Claudia Sheinbaum expressed confidence that a trade agreement might be finalized before the August deadline.

In the commodities market, gold saw a slight increase due to demand as a safe investment, rising 0.3% to $3,366 per ounce. [GOL/]

Crude oil prices rose slightly due to expectations that Trump might introduce stricter penalties against Russia later on Monday, such as taxes on key buyers of Russian oil. [O/R]

Brent rose by 0.1% to $70.45 per barrel, whereas U.S. oil increased marginally to $68.50 per barrel.

(By Wayne Cole; Edited by Christopher Cushing)