Risk aversion has returned to be the dominant theme in the financial markets on Tuesday as the threat of tariffs looms with the approach of Donald Trump’s Friday deadline to come up with a deal, in order to prevent the tariffs from being imposed. US Stocks are down by around 1.7%, WTI by almost 2%, while in the FX markets the winner has been the Jpy, with the US$ not far behind as traders headed for safe-haven style assets. US yields are also lower on safe haven demand, while the German 10Y bund has headed back into negative territory and the metals are also firm, while holding previous technical levels. At this stage, there is still some hope of a resolve in the negotiations and Chinese Vice Premier Liu is to travel to the US on May 9/10, but time is running out to reach a consensus by Friday.
Looking ahead, the main interest today will come from NZ, from where we get the RBNZ Meeting, at which a 25bp cut is largely expected and should push the Kiwi lower although this is probably largely priced in and much will depend on the statement and press conference. Also from Asia we get to see the China Trade Balance for April (exp +$35 bio; Imports -1%, Exports +2.3%) although after that there is little data to move the markets. The German Industrial Production is due (exp -0.5%mm), while the ECB Non-Monetary Policy Meeting takes place although it is a partial holiday in Europe so liquidity will be a bit thin. Central bank speakers will then take centre stage, led by Mario Draghi who may create some waves, while other speakers will include Ramsden (BOE) and Brainard (Fed). Have a good day.
Economic data highlights will include:
Wed: VE Day EU Holiday, Japan Services PMI, China Trade Balance, RBNZ Interest Rate Decision/Statement/Press Conference, German Industrial Production, EU Non-Monetary Policy Meeting, EIA Crude Oil Stocks Weekly Change
Bonds: US10Y; 2.45% (-1.87%), German 10Y; -0.036% (-545%), UK 10Y; 1.159% (-5.01%), Australian 10Y; 1.794% (+2.58%), NZ 10Y; 1.875% (+0.27 %), China 10Y; 3.359% (+0.28%)
Stock Indices: DJI; -1.79%, S+P; -1.65%, NASDAQ; -1.96%, EUStoxx50; -1.78%, FTSE100; -1.63%, Shanghai Composite; +0.70%,
Metals: Gold $1284 oz (+0.3%), Silver $14.91 oz (+0.07%), Copper $2.788 lb (-1.48%), Iron Ore $94.75 per tonne (NYMEX) (+1.33%),
Oil: WTI $61.40 pb (-1.75%)
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