• The S&P 500 initially sold off rather drastically in the Asian session, as futures traders reacted to the Chinese threatening the Americans in a bit of a tit for tat scenario. Ultimately, this is a market that has plenty of support underneath and I think it’s only a matter of time before the buyers come back in on dips. However, if we were to break down below the 2800 level, the market could go much lower. Keep in mind that this is all about headlines and emotion right now so regardless you will need to keep your position size relatively small.

We are currently chomping around the 50 day EMA, so that of course rings in a bit of technical trading. This is a market that continues to find buyers on dips, and as a result you have to come up with a “line in the sand.” The 2800 level being broken would be drastic negativity. However, on signs of support we could reach towards the 2900 level. A break above that level could send this market much higher.

• European markets traded higher Tuesday after tensions eased slightly in the escalating trade war between the U.S. and China.

The pan-European STOXX 600 edged 0.3% higher in early deals, with technology stocks leading gains with a 1% rise.

• Asian shares won some respite on Tuesday after Washington temporarily eased trade restrictions imposed last week on China’s Huawei, although fears of a further escalation in tensions kept investors on edge.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up by a marginal 0.1% but stayed not far from a four-month low touched on Friday.

“With the news around the U.S. and Huawei taking a turn for the worse, it seems that the trade war is increasingly showing signs of becoming a tech war,” said Seema Shah, senior global investment Strategist at Principal Global Investors in London.

“The further this trend develops, the bigger the collateral damage will be – particularly in Asia and the U.S., but the ripple effect will be significant across the globe.”

• Japan’s Nikkei slipped on Tuesday as Washington’s blacklisting of Huawei took a heavy toll on suppliers to the Chinese telecoms equipment maker, but the downside was limited after the United States temporarily eased trade restrictions.

The Nikkei ended 0.1% lower at 21,272.45. It briefly turned positive after news the U.S. government had temporarily eased trade restrictions imposed last week on China’s Huawei Technologies Co Ltd.

Since the White House added Huawei to a trade blacklist last week, several global companies have suspended business with the world’s largest telecoms equipment maker.

“We are worried that the move by the U.S. would lead to a further deterioration of trade tensions between the United States and China. If the trade worries drag on, Japanese companies’ earnings in the second half will also likely be hit,” said Nobuhiko Kuramochi, a strategist at Mizuho Securities.

• Chinese shares finished higher on Tuesday as investors took heart from the temporary easing of U.S. trade restrictions on Chinese telecoms firm Huawei.

At the close, the Shanghai Composite index was up 1.23% at 2,905.97. The blue-chip CSI300 index ended 1.35% higher.

Washington on Monday temporarily eased trade restrictions imposed last week on China’s Huawei Technologies Co Ltd in an attempt to minimise disruption for its customers. But Huawei’s founder, Ren Zhengfei, dismissed the move and said that the tech firm had prepared for U.S. action.

Reference: Reuters, CNBC, BBC