Wall Street declined due to revived U.S.-China trade tensions. WTI crude oil surges on new US sanctions on Russia. The US dollar extends gains.
Wall Street slips as US-China trade tensions resurface; dollar and oil extend gains
Key takeaways
- US-China trade tensions resurface: Wall Street declined as reports suggested the US may restrict tech and software exports to China, seen as leverage before this weekend’s trade talks in Malaysia.
- Mixed market reactions: Major US stock indices fell but found support at their 20-day moving averages; Tesla dropped 3.8% post-earnings, though futures remained steady in Asia trading.
- The dollar and oil strengthen: The US dollar extended gains, led by yen weakness amid Japan’s stimulus hopes, while WTI crude surged 3% after new US sanctions on Russian oil producers.
Wall Street ended lower on Wednesday, 22 October, on the backdrop of a revival of US-China trade tensions. A media report from Reuters highlighted that the US White House administration is considering a plan to curb a wide range of software exports to China, from laptops to jet engines.
The small-cap Russell 2000 and Nasdaq 100 led the decline with 1.4% and 1% losses, while the S&P 500 and Dow Jones Industrial Average dropped by 0.5% and 0.7% respectively. Interestingly, these losses were pared back after a retest on their respective 20-day moving averages, acting as intermediate supports.
The latest US trade control manoeuvre towards China is likely brinkmanship plays ahead of this weekend's high-stakes trade negotiation meeting between US Treasury Secretary Scott Bessent and China Vice Premier He Lifeng in Malaysia, which may cement the in-person meeting between US President Trump and China President Xi at the end of October during the APEC Summit in South Korea.
Tesla, a mega-cap US stock, plummeted by 3.8% at the end of the after-hours US session after the release of Q3 earnings results that missed expectations due to higher operating costs (earnings per share: $0.50 versus $0.54 estimated).
However, Tesla's after-hours sell-off did not materially impact the S&P 500 and Nasdaq E-mini futures in today’s Asia session, as both traded positively with modest gains of around 0.1% at the time of writing.
In the FX market, the US dollar has continued to rise since last Friday, 17 October. In today’s Asia session, the US Dollar Index is up by 0.2% despite increasing odds of Fed rate cuts heading into 2026, where Fed funds futures traders have priced in at least three Fed funds rate cuts of 25 basis points each in 2026, according to the latest data from the CME FedWatch tool.
Today’s US dollar strength is led by weakness in the Japanese yen (-0.3), which traded towards an intraday level of 152.45 against the greenback over fears that the new Japanese Prime Minister Takaichi will unveil a large-scale fiscal stimulus package of more than 13.9 trillion yen in November.
WTI crude rallied by 3% on Wednesday, 22 October, its biggest single-day gain since 29 July 2025. It traded back up above US$60/barrel as US President Trump announced sanctions on Russia’s biggest oil producers due to Moscow’s lack of commitment to a peace deal with Ukraine.
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