Risk-off kicks in on poor US data and in a stream of trade headlines, VIX +15%

• US benchmarks take a hit following poor US data and a series of trade headlines crossing the airwaves. 
• Wilbur Ross is telling Fox that President Trump will increase tariffs if there is no China deal.
• Hong Kong Human rights Act signing sparks up concerns over US/Sino trade relations. 
• White House advisor, Conway, says phase one of China trade deal is being written up.
• Trump to restore tariffs on steel from Brazil and Argentina. 

US markets have been roiled in recent trade by a series of trade headlines that do all but instil 100% confidence in investors who are seeking for a resolve to over 17 months of a trade standoff between the US and China. There are conflicting headlines working their way through to screens and airwaves which have made for a sell-off in tentatively high US benchmarks on Wall Street, fuelling a bid into the VIX which met a high of over 15% in slightly earlier trade. This was the highest level in nearly six weeks.

At the time of writing, the Dow Jones is down 0.74%, or over 200 points and the S&P 500 is off by 22 points, or 0.71%. Gold rallied back towards neutral by just over $10.00 from a low of $1,454 to tread water in the $1,460s and the yen rallied across the board resulting in USD/JPY to fall from a high of 109.72 to a low of 109.00 the figure. Meanwhile, and a little strangely, AUD has been less affected – AUD/USD remains elevated by over 80% and trades near to the day's highs of 0.6822 at the time of writing. 

Conflicting trade sentiment 

• US-China trade wars: Reports suggest countries set to cut Phase One deal soon

The fact that Wilbur Ross has stated that the US will increase tariffs if there is no China deal should not come as any surprise, but it doesn't exactly offer much conviction that the US and China are, as Trump put it recently, 'in the final throes' of a trade deal. It goes to a reminder that US and Chinese relations are fragile, to say the least, and a trade deal could be jeopardised at any moment. The latest moves by Trump to sign to Hong Kong bills and China's retaliation are a perfect example in this regard. It has been reported by a source that told the Global Times that China will release an "unreliable entity list" soon, which includes relevant US entities. Secondly, the US House is expected to pass a Xinjiang-related bill that will harm Chinese firms’ interests, prompting China to speed up the move. Trump was earlier reported stating that the HK bill doesn't make the trade talks better. Despite all of this malaise, US advisor, Conway, said a phase one of China trade deal is being written up – however, what markets are figuring, is that that's all well and good, but it's being written up while walking through a minefield of ticking time bombs. 

AUD remains robust despite intermarket drags

AUD/USD is shrugging off the concerns. Usually, the Aussie is mostly correlated to the commodity complex and trades as a proxy to the trade headlines, so its robustness deserves some deeper digging into to really try to understand where the focus lies within these headlines.

Firstly, the week started with a series of good news from the Chinese economy and its manufacturing sector which has fuelled a bid into the Aussie. In today's session, the US data was dismal with US ISM manufacturing missing the mark and contracting deeper from 48.3 prior to 48.1 and below the expected 49.2.