Treasuries rally amidst the escalating US-China trade war

China Market Watchers Wait for Beijing's Move in Trade DisputeMore

China Market Watchers Wait for Beijing's Move in Trade DisputeMore

US Treasury Secretary Steven Mnuchin will plan for another trade meeting in China at some point soon, a Treasury spokesman said on Tuesday, echoing President Donald Trump's earlier statements that US dialogue with Beijing was continuing.

The S&P 500 dropped the most in four months, the Dow Jones Industrial Average slumped more than 600 points and the Nasdaq Composite saw the biggest decline of the year after China targeted some of the nation's biggest exporters. Last year, China's Treasuries holdings fell by about 5%, second in scale only to the 2016 reduction. That comes as he prepares to meet his Chinese counterpart, Xi Jinping, at next month's G-20 summit, an encounter that could prove pivotal in a deepening clash over trade. The offshore yuan - a key risk indicator due to concern China will use it to retaliate against US tariffs - stabilized after a six-day decline.

Gold prices surged on Monday to a one-month high on what some analysts attributed to "safe-haven" buying in response to a steep plunge in USA equity markets. The president also ordered tariffs to be raised on all remaining United States imports from China, which are valued at around $300 billion.

The S&P 500 jumped more than 1%, reclaiming about half of Monday's sell-off, with momentum picking up after Trump said he's talking with China. On the other hand, disappointing data could place added pressure on China to reach a trade agreement which has potential to stymie further gains in USDCNH.

Included in China's Twitter response to U.S. tariffs being increased on products originating in China, the threat of China selling U.S. Treasury bonds was explicitly called out a viable response option.

Earnings this week include Vodafone, Alibaba, Tencent, Cisco, Nvidia.

Kansas City Fed President Esther George and Richmond Fed President Thomas Barkin make appearances.

Nevertheless, the next direction of spot USDCNH may be dictated by upcoming Chinese economic data such as industrial production, retail sales, property investment and the jobless rate which are all expected to be released Wednesday at 2:00 GMT.

"We believe the trade talk headlines will continue swinging sentiment in the coming weeks, given the Fed's patience on interest rates".

Australian unemployment is out on Thursday. South Korea's Kospi index lost 0.9 per cent.

The MSCI Asia Pacific Index sank 0.7 per cent. And here are the main market moves: Stocks Japan's Topix index rose 0.1% as of 9:05 Tokyo.South Korea's Kospi index dipped 0.1%.Australia's S&P/ASX 200 Index rose 0.2%.

The euro bought $1.1203, little changed.

US crude fell 0.05% to $61.63 per barrel and Brent was last at $70.81, up 0.27% on the day. Currencies The yen was at 109.63 per dollar after falling 0.3%.

The Aussie lost 0.3 per cent to 69.81 USA cents.

Yields on 10-year Treasuries fell as much as five basis points to 2.41 per cent, the lowest level since March 29.

Gold increased 1% to $1,300.10 an ounce.

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