Trade war gets real; Markets slide; Mexican peso wobbles

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1. Trade showdown: The global trade clash is heating up this week.

US tariffs on $34 billion worth of Chinese goods are due to go into effect on Friday, and Beijing is expected to retaliate in equal measure the same day.

Meanwhile, Canada imposed tariffs on US exports worth 16.6 billion Canadian dollars ($12.5 billion) on Sunday, the latest trading partner to hit back against the Trump administration's steel and aluminum tariffs.

For investors, the big fear is further escalation. Trump has threatened more tariffs on hundreds of billions of dollars of additional Chinese goods, and floated the idea of tariffs on European cars.

The European Commission sent written comments to the US Commerce Department on Friday warning that as much as $294 billion worth of US goods could be affected by countermeasures if the Trump administration goes ahead with tariffs on imported cars and car parts.

"The EU is not inclined to give in to bullying by US President Donald Trump," said Holger Schmieding, chief economist at Berenberg.

2. Global market overview: The deepening tensions are unsettling investors. US stock futures were down early on Monday, and all major global markets dropped.

European markets slid at the open. Germany's Dax, the UK's FTSE 100 and the French CAC 40 were all down by more than 1%.

Asian markets also suffered. The benchmark index in Shanghai sank 2.5%, while Japan's Nikkei fell 2.2%. Hong Kong markets were closed for a public holiday.

3. Jittery peso: The Mexican peso went on a roller-coaster ride after left-wing leader Andres Manuel Lopez Obrador's apparent victory in the country's presidential election.

The currency gained as much as 1% against the dollar when exit polls and initial results indicated Lopez Obrador would win. But it then reversed its course and was trading roughly 1% lower by early Monday.

Investors can't figure out what to make of the new president, including his economic policies and his future relationship with the United States.

4. Friday market recap: US markets ended a wild first half of 2018 on a positive note on Friday.

The Dow closed 0.2% higher on Friday, trimming its loss for the year so far to 1.8%. The S&P 500 and the Nasdaq were both up 0.1% on Friday.

The Nasdaq is up 8.5% this year. The S&P has gained 1.7% since the start of the year.

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5. Companies and economics: The Census Bureau plans to release new home sales report for May at 10 a.m. ET.

German Chancellor Angela Merkel will try to prevent her government from collapsing over immigration policy. Her CDU party and coalition partner CSU will try to work out their differences on Monday.

Hedge fund billionaire Dan Loeb is stepping up pressure on Nestle (NSRGF), accusing it of a "muddled strategic approach." The activist investor's fund Third Point took a $3.5 billion stake in Nestle a year ago, saying it would push for a new strategy to help the company improve its sales and profitability. Shares in Nestle opened 0.4% lower.

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6. Coming this week:

Monday — Facebook (FB) executives scheduled to testify before European Parliament
Tuesday — American automakers report June sales; US markets close early
Wednesday — US markets are closed for Independence Day
Thursday — US Federal Reserve reports its Board of Governors meeting minutes
Friday — US jobs report; US tariffs on $34 billion of Chinese goods go into effect