It has mostly been a day of risk aversion after Donald Trump signed a presidential memorandum that could impose tariffs on up to $60 billion of imports from China, although his action was somewhat watered down compared to the fears of an all-out trade war. Under the terms of the memorandum, Trump will target the Chinese imports only after a consultation period, a measure that will give industry lobbyists and legislators a chance to water down a proposed target list which runs to 1,300 products. The Yen has been the main beneficiary while the AUD$ remains the weakest, due its tie with China. Earlier in the day, with regard to Cable, the BoE left bank rate unchanged at 0.50% and asset purchase target at GBP 435b as widely expected. Sterling initially spiked higher as 2 hawks dissented and voted for rate hike but the overall tone of the statement remained cautious and Sterling later gave back some of its ground. Elsewhere, stocks did not like the Trump stance on China and the US indices are down by around 3% and it looks as though they could go a lot lower, while the commodities are also heavy, with WTI down by around 1.3% and the metals by 0.25%.
In terms of data, the EU PMIs were generally disappointing and weighed on the Euro. The EU PMI manufacturing dropped to 56.6 in March, down from 58.6, below expectation of 58.1, the lowest in 8 months. The EU PMI services dropped to 55.0, down from 56.2, below expectation of 56.0 while the EU PMI composite dropped to 55.3 down from 57.1, lowest in 14 month. The German PMI manufacturing dropped to 58.4 in March, down from 60.6, below expectation of 59.8. The PMI services dropped to 54.2, down from 55.3 and missed expectation of 55.0. Also from EU, the German IFO business climate dropped to 114.7 in March, down from 115.4 but slightly above expectation of 114.6. The IFO expectation dropped to 104.4, down from 105.4, met consensus and the current assessment dropped to 125.9, down from 126.3, above expectation of 125.6.
From the US, the initial jobless claims rose by 3k to 229k in the week ended March 17. The 4-week moving average rose 2.25k to 223.75k. Continuing claims dropped -57k to 1.83 mio, the lowest since December 1973. House price index rose 0.8% mom in January.
Friday will be mostly about politics, with the prospects of a trade war dominating the concentration of traders. There is an EC meeting at which Mario Draghi will be present. That aside, Japan will have the CPI figure for February (exp 1.7%yy, Ex F/E 1.0%). The BOE Quarterly Bulletin will be released in early European trade, while from the US we get the February Durable Goods Orders (exp 1.5%, ex- transportation, 0.5%), the New Home Sales for Feb (exp 0.623 mio) and a speech from the Feds Kashkari. Have a good w/e.
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