US Stocks Hit Record but Turmoil Swirls

The S&P 500 topped the January record briefly on Tuesday but trade and political headwinds stalled the rally with more signs of trouble to come. The pound was the top performer while the yen lagged. Australia is in focus later with construction work and a speech from Debelle to come. The Dow30 short was stopped out while the USDJPY short was closed at a gain. This week's Premium video below focuses on whether EURUSD will hit $1.12 or the road to $1.20 remains intact.

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Risk assets climbed early in the day on a likely delay in US auto tariffs revealed by Commerce Sec Ross. The market interpreted that as a sign they could be shelved altogether as the US focuses on China instead of Europe and Mexico.

In addition, Brexit negotiators Raab and Barnier held a joint press conference where they spoke about non-stop talks in hopes of a deal in October. That helped to spur GBP and EUR buying with both climbing near a full cent against the US dollar.

Beneath the surface there are worries. The S&P 500 pared most of its gains late as did yen crosses. On China, Trump downplayed this week's lower level meetings with Beijing, saying he doesn't expect anything to come of it. Separate WSJ and Axios reports highlighted Trump's zest for a fight with China and the support of his cabinet in that battle.

"He's resolved to be the guy that changes the world trading system. ... He's willing to take some pain to do it,” an unnamed member of congress said.

US markets have yet to reflect that possible pain while Chinese markets remain 20% below recent highs. US futures did slide late on some major legal drama as former Trump campaign director Manafort was found guilty of 8 crimes while in a separate courtroom Trump lawyer Cohen pleaded guilty to tax fraud and campaign finance violations that he said were directed by Trump.

The double-dose of legal jeopardy raises a major risk that the President could launch into a new tirade in the day ahead or do something else to destabilize US politics. In the past, note that all his meltdowns have proven to be buying opportunities or risk assets. That said, if he takes his wrath out on China via a trade war, that's a different scenario.

Trump will be speaking at a rally in Virginia in Asia-Pacific trading. Also during that session, New Zealand reports on Q2 retail sales while Australian reports on Q2 construction work. Both a likely to be market movers and so is a speech from Debelle at 0310 GMT.