Despite the new round of US tariffs on Chinese imports taking effect on Friday, the markets seemed to take them in their stride and, for the most part, the reaction was rather muted. As the tariffs were imposed, with the threat of more to come, Donald Trump stepped up his hard-line stance and tweeted that he is in no hurry to make a trade deal with China, while the Chinese negotiators have said that they remain optimistic of a deal after “candid and constructive” talks. A protracted standoff seems to be the end result that will keep us on our toes for the foreseeable future, and Donalad trump seems to have already upped the ante on China with some rather aggressive weekend Tweets, stating that any trade deal will be far worse for China if it has to be renotiated in his 2nd term as President. Donald looking ahead optimistically! In the meantime, we can probably expect Chinese retaliation on the US, if no progress is made, which would not bode well for risk assets.
At the end of the Friday session, the US$ was mildly softer against most of the majors, not helped by the US inflation data, although US$Jpy saw a bit of a bounce bounce from new 3 month lows, assisted by a recovery in US stocks from their own new 6 week lows, on the back of the upbeat tone coming from the negotiators. The metals/oil were choppy but generally rangebound.
In terms of economic data, the headline US CPI rose to 2.0% yy in April, up from 1.9% yy but missed expectations of 2.1% yy, while the core CPI matched expectations at 2.1% yy. US stocks had a volatile ride but ended the session at their highs, with the SP/DJI up by around 0.4%.
Looking ahead, the coming week will be busy, albeit mostly with secondary tier data, and the market will more likely have its eyes on developments in the US/China trade negotiations.
Monday will be quiet although the Australian Home Loans data may create a few waves for the Aud$, as could the NAB Business Conditions/Confidence on Tuesday. Other interest on Tuesday will centre on the German inflation figure and the ZEW, while Wednesday will look to the China Retail Sales, Industrial Production, Fixed Asset Investment as well as the NBS Press Conference, and then later, to the German/EU Q1 Preliminary GDP, Employment Change and the US Retail Sales. Thursday will see the Australian Unemployment for April and the US housing data, also April, while Friday will wind up the week with the EU CPI and the Preliminary Michigan Consumer Sentiment Index for May. Have a good week.
Economic data highlights will include:
Mon: NZ Food Price Index, Australian Home Loans/Investment Lending for Homes, China Foreign Direct Investment, Japan Coincident Index, Leading Economic Index
Tue: NZ Visitor Arrivals, Australian NAB Business Conditions/Confidence, Japan Eco Watchers Survey, Trade Balance, Current Account, German CPI/HICP, UK Unemployment, EU Industrial Production, German/EU ZEW Economic Sentiment Survey, US NFIB Business Optimism Index, Import/Export Index, API Weekly Crude Oil Stock Inventory
Wed: Australian WBC Consumer Confidence, China Retail Sales, Industrial Production, Fixed Asset Investment, NBC Press Conference, Japan Housing Starts, Construction Orders, Machine Tool Orders, German/EU Q1 Preliminary GDP, Employment Change, US Retail Sales, Industrial Production, Capacity Utilisation, NAHB Housing Market Index, EIA Crude Oil Stocks Weekly Change,
Thur: Eurogroup Meeting, China House Price Index, Australian Unemployment, RBAs Bullock Speech, US Housing Starts, Building Permits, Philadelphia Fed Mfg Survey, Jobless Claims BOE Haskell Speech
Fri: NZ April Business PMI, Q1 PPI, Australian Consumer Inflation Expectation, German Wage Price Index, EU April CPI, Michigan Consumer Sentiment Index, Baker Hughes Oil Rig Count
Market moves, in brief:
FX: DXY 97.32 (-0.10%)
Bonds: US10Y; 2.469% (+0.71%), German 10Y; -0.044% (+6.5%), UK 10Y; 1.129% (+0.41%), Australian 10Y; 1.74% (+0.79%), NZ 10Y; 1.825% (-0.54 %), China 10Y; 3.339% (+1.39%)
Stock Indices: DJI; +0.44%, S+P; +0.37%, NASDAQ; +0.08%, EUStoxx50; +0.31%, FTSE100; -0.06%, Shanghai Composite; +3.10%
Metals: Gold $1286 oz (0.00%), Silver $14.77 oz (0.00%), Copper $2.777 lb (+0.36%), Iron Ore $95.08 per tonne (NYMEX) (+0.89%),
Oil: WTI $61.70 pb (+0.18%)
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