US indices erased earlier gains and closed lower following China’s announcement to adopt retaliation measures against US tariff hikes. This morning, President Trump declared that China’s leaders ‘broke the deal’ in a campaign rally speech.

Futures are trading mildly lower at Asian opening hours, suggesting that trade uncertainty are weighing on market sentiment.

Last night, the S&P 500 sectorial performances didn’t show a strong pattern overnight, with utilities (-1.38%), communication services (-0.36%) and financials (-0.29%) among the laggers while healthcare (+0.12%), real estate (+0.05%) and industrials (+0.01%) among the worst performers.

Brent oil prices rebounded overnight as US commercial crude inventory unexpectedly dropped 3.96 million barrels, but it subsequently erased most gains this morning. Brent is testing a key support level at US$ 70.0, breaking down below this level will lead to further downside towards US$ 68.0. From the day chart, SuperTrend (10,2) suggests oil prices entered into a bearish trend two weeks ago and it’s price can head lower in the days to come.

In the currency market, JPY is strengthening against G10 peers due to hefty demand for safety. NZD rebounded to 0.658 against the greenback, recovering heavy losses resulting from the Reserve Bank of New Zealand’s (RBNZ) interest cut yesterday. AUD/USD is the worst performer among G10 currencies this morning, falling below the 0.700 mark as trade uncertainty weighs on the prospect of Aussie and RBNZ’s interest rate cut. It’s viewed as the next move guidance for the Reserve Bank of Australia (RBA).

In Singapore, the Straits Times Index has fallen over 3.5% to 3,283 points since Trump’s tariff tweet sent three days ago. At the current level, the STI could find some support at its 50-Day Simple Moving Average (SMA) line which lies at 3,277 points. Its 100-Day and 200-Day SMA can be found at 3,219 and 3,188 points respectively, which can be viewed as key support levels.

The next 36 hours will be crucial to set the tone of global equities in the next couple of weeks, as it serves as the last opportunity for China trade delegates to negotiate for a trade truce before higher tariffs kicks in. The consequences could be enormous if a full-blown trade war erupts and it could hurt both sentiment and the real economy. The markets have perhaps not fully prepared for that worst scenario.

Crude Oil Brent – Cash (Day)

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