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Dollar drifts away from futures markets as they sail towards tariff storm

Dollar drifts away from futures markets as they sail towards tariff storm

The financial markets started the week with a mixed bag. U.S. stocks futures rose, but the dollar weakened ahead of the coming week. This was due to data, Chinese earnings as well as the threat of steep U.S. Tariff hikes.

S&P 500 Futures rose about 0.6% and Nasdaq100 futures increased 0.8% in the morning Asian session. Japan's Nikkei climbed 0.2% and Hong Kong's Hang Seng rose about 0.2%

Early trade saw the euro rise 0.2% to $1.0835, after a slight drop last week. The Turkish lira is on the edge of a cliff in emerging markets as investors are uneasy about President Tayyip Erdoan's main opponent being jailed.

The shares of Australia's fibre-cement manufacturer James Hardie dropped 12% after the company announced that it would purchase outdoor building products maker AZEK Company in the United States for $8.8 Billion in cash and stocks.

This week, we will see global purchasing managers' indexes, preferred inflation data from the U.S. Federal Reserve, inflation data for Australia and Japan as well as a budget update and earnings figures in China.

Analysts said that after a volatile trading month in stocks, bonds, and currencies, there was no clear trade to come.

Chris Weston is the head of Pepperstone's research.

"You have to think like the consumers and households," said he, as fears of a global slowdown led to weeks' worth of dollar and stock sales and a rally in Treasuries.

We start to panic when we see that the price pressures won't be temporary or that there is a higher likelihood of a recession.

Trump has promised to impose a complex barrage of tariffs on next week. The details are unclear, but they will be calculated in order to reflect both the impact of foreign import tariffs and foreign value added taxes.

S&P 500 gained a little on Friday, after Trump hinted that he was flexible. However, after an eventful first two months, which included tariffs on China, Mexico, and Canada, traders are hesitant to bet on Trump's willingness to make deals.

The yields on ten-year U.S. Treasury bonds have dropped nearly 40 basis points since mid-February and are now at 4.27%. Investors have fled the U.S. stock market, with Hong Kong and Europe seeing sharp rallies as Wall Street plummeted.

Hong Kong shares have risen 18% this year. This is the highest gain in any major market. But a drop of 4,4% over two days late last week indicated a pause while traders considered their next moves - and Trump’s.

The focus will be on the earnings of BYD automaker, Kuaishou video platform as well as Chinese bank and several property developers. Dollar Tree, a discount retailer in the U.S. and Lululemon, a high-end athletic clothing company are both on the agenda.

Gold was just below the record high of last week, at $3,021 per ounce. Bitcoin remained at $85,860.

In a client note, Bob Savage of BNY's macro-markets strategy department said: "Cash and safe assets remain the counterbalance for any larger change in strategy."

"We expect that a series diplomatic meetings will eventually avert the extreme tariffs, but not before April. This leaves the sequencing concerns about Trump's policy changes continuing to move markets, with continued economic uncertainty." (Reporting and editing by Christopher Cushing; Tom Westbrook)

(source: Reuters)