US stocks dived on Friday, with the S+P and DJI both down by around 2.2%, as growing tensions between the US and China exacerbated investor fears of an all-out trade war, with the deepest declines among companies that stand to suffer most from an escalation in protectionist trade policies, such as big industrial manufacturers like Boeing and Caterpillar.
The dollar was slightly softer as well, underwhelmed by the US unemployment data which came in much weaker than expected at only 103k growth in March, versus expectation of 189k. February’s figure was revised up from 313k to 326k and the headline unemployment rate remained unchanged at 4.1% versus expectation of 4.0%. In slightly more positive news, the average hourly earnings rose 0.3% mm, meeting expectation. The dollar also received no help from US yields which headed lower (10 Year @ 2.77%), as traders questioned how many times the Fed will actually need to lift rates this year. Right now 3-4 hikes would seem excessive although Fed Chairman Jerome Powell stuck closely to the documented script on the economic outlook on Friday, sketching a picture of gradual interest-rate hikes ahead, while at the same time saying that it is too soon to know if the trade issue will take a toll on the US economy, which has been steadily strengthening.
The metals made some minor gains on the back of the softer dollar, while WTI fell 2.3% due to traders exiting long positions amid the escalating US/China trade tensions, and also not helped by the U.S. oil rig count, wheich jumped to a three-year high adding to downside momentum. Baker Hughes indicated that the number of oil rigs operating in the US rose by 10 to 808, the highest level since March 27, 2015.
The coming week will be fairly thin with regards to the economic calendar. The highlights of the week will be the March, Chinese and US CPI (Wed), the ECB Minutes (Thur) and the German CPI (Fri). Other points of interest will be EU Sentix Investor Confidence Survey (Mon), US PPI, Business Inventories (Tue), UK Manufacturing/Industrial Production & Goods Trade Balance (Wed), and the RBA Financial Stability Report and both the China and EU Trade Balance (Fri).
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