Originally published by AxiTrader
Market Summary (8.08am Friday, August 30)
Readers of this note won’t be surprised that having – almost – dealt with NAFTA, and with the EU battle in abeyance, President Trump has swung his focus back to China. According to Bloomberg overnight he “wants to move ahead with a plan to impose tariffs on $200 billion in Chinese imports”.
Stocks pulled back on the news that all things weren’t settled on global trade. But the falls are only small all things considered and given the proximity to the record highs set just this week. Perhaps the PCE inflation, incomes, and spending data in the US – which speaks to economic momentum – is enough.
Perhaps it’s that President Trump is winning more than he loses right now so markets have faith he’ll prevail in the end. I don’t know. Let’s see the performance if he does go the full wack on the $200 billion and what the Chinese reaction is.
Risk appetite also took a hit across global markets as emerging currencies came under pressure once more as well. The South African rand has lost 2.6% as local policy uncertainty combines with the overall weakness that’s remerged in EM. The litany of losers of more than 1% against the US dollar overnight include the Mexican peso, {{|Brazil real}}, Colombian peso, Chilean peso, and of course the Turkish lira which lost 3.2% to 6.63 after the deputy governor of the central bank resigned. Argentina was also in the news with its peso down 12% against the US dollar overnight.
President Trump has had a bit to say in the last 20 minutes, reports at least, threatening to leave the WTO, doesn’t regret Powell appointment and so on. But just a Tweet that a Bloomy journo said on telly Europe may be back in the president’s sights.
So, the moves in stocks are really quite mild all things considered – money locked up in passive accounts and indexes will do that. So too will losses every time active managers give stocks a nudge to see them rebound quickly. That’s left the S&P 500 down around 0.44% at 2,901, the Dow off 0.53% at 25,986 and the Nasdaq 100 at 7,642 down just 0.23%.
European stocks were also under pressure – as was Asia yesterday – with the DAX off half a per cent, the CAC down 0.42% and the FTSE in London falling 0.62%. But, after a lacklustre day yesterday on the ASX which was essentially flat at 6,351 SPI traders have managed to find 5 points of gains this morning – no really. We’ll see.
To forex markets now where the corollary of the weakness in EM has been a little strength in the yen with USD/JPY falling 0.6% to 110.97. The Aussie too has reacted – to the overnight moves and yesterday’s big miss in CapEx – and is down 0.6% at 0.7265. The Kiwi too has troubles of its own after “recessionary” level business confidence yesterday – NZD/USD is down about 1.1% at 0.6645. And the Canadian dollar has also lost ground with USD/CAD up 0.5% to 1.2971 amid the turmoil and after a slightly weaker than expected 2.9% Q2 GDP print.
The euro and pound a stable by comparison at 1.1670 and 1.3015 against the US dollar respectively for losses of just 0.1% and 0.3%.
Gold is back at $1200, down half a per cent, copper lost 1.27% in HGc1 terms and is back at $2.67 and the CRB, and commodity stocks, are lower. Oil on the other hand is higher again as inventories in Africa and Europe are drawn down and as Iranian supply drains away faster than anticipated. WTI is up 0.92% at $70.15 while Brent is at $77.59 up 0.6%.
On the day kiwi traders will be watching consumer confidence in New Zealand. We also get South Korean construction, industrial production, and retail sales data. Japan has production, unemployment, and Tokyo prices, while here in Australia we have the RBA financial aggregates data (debt) out.
Chinese official PMI’s are to be released as well and tonight it’s German retail sales French and Euro Area inflation, Indian GDP, Canadian PPI and the Chicago PMI in the US – along with Michigan consumer confidence.
Interesting end to the week and month – have a good one.
Macro Stuff that affects everyone and everything – either today or eventually
International
- Bloomberg is reporting a number of things this morning that President Trump has said in an interview with them. I haven’t got he full story yet but Bloomberg’s Joe Wiesenthal tweeted earlier that, “*TRUMP SAYS HE DOESN'T REGRET APPOINTING POWELL AS FED CHAIRMAN; *TRUMP: THINKING ABOUT LINKING CAPITAL GAINS TAXES TO INFLATION; *TRUMP THREATENS TO WITHDRAW FROM WTO IF IT DOESN'T `SHAPE UP'” and I’m also seeing new tweets which say Bloomberg is reporting “Trump said in interview, EU removal of auto tariffs not enough for a deal, wants more – BBG”.
- That, and the Bloomberg story which says the President is getting ready to hit China with the next $200 billion, makes this an interesting end to the week and the month potentially for markets. Bloomy reported that “some of the people [they spoke to] cautioned that Trump hasn’t made his final decision, and it’s possible the administration may enact the duties in installments…It’s also possible the president could announce the tariffs next week, but say they will take effect at a later date”. That covers all the bases there doesn’t it? We’ll have to see what happens but my sense is the President will feel like he is winning and is likely to go for it. John Micklethwait, the Bloomy editor in chief, who conducted the interview said on Bloomberg TV this morning that the president was ebullient. That supports my view he thinks he’s winning. Micklethwait also said the European offer to go to zero tariffs on cars is not enough. He wants a better outcome. Watch this space folks.
- EM currencies are roiled again as I’ve highlighted in the introduction. This is something to watch as this is the second wave of weakness after many folks thought the markets had settle down over the past week or so. The Turkish lira at 6.63 is a warning, the Argentine peso losing 12%, the rand losing more than 2%. We can argue each is idiosyncratic. But these markets bear watching at present.
- The pound stayed elevated last night, but it is worth noting that EU negotiator Barnier last night warned the EU still needs to plan for no deal Brexit while the German finance minister said its difficult to say that there will be a Brexit agreement.
- EU economic sentiment dipped again overnight. Reuters reported, “economic sentiment indictor for the 19 countries sharing the euro currency eased to 111.6 points in August from 112.1 in July, continuing a downward trend started since a peak of 115.2 last December”.
- German inflation dipped back a little in August with the harmonised rate falling to 1.9% from 2.1%.
- China announced tax cuts yesterday to support the economy Reuters reports – Chinese stocks were lower yesterday. And China and Japan, after a meeting, said that everyone should protect free trade. I agree, as long as it’s fair.
- The Atlanta Fed dropped it’s GDPNowcast for Q3 from 4.3% to 4.1% overnight
Have a great day's trading.