HomeContributorsFundamental AnalysisAwaiting Details Of China's Response To US Trade Tariffs

Awaiting Details Of China’s Response To US Trade Tariffs

Notes/Observations

  • US pulls the trigger and implements additional tariffs on $200B of China goods; trade talks continue in Washington
  • UK Q1 GDP data in-line with expectations and improves quarterly largely attributed to stockpiling ahead of Brexit

Asia:

  • US implemented that increase of tariffs on $200B of China goods from 10% to 25% and would apply to products exported from Friday, May 10th (not goods that are already in transit)
  • China announced that it would retaliate (no specific details provided) and added that it deeply regretted the US move on tariffs hike. China reiterated its stance that was to solve trade issues via dialogue
  • RBA Statement on Monetary Policy (SOMP) reiterated the recent rate decision. Board judged lower unemployment rate achievable given subdued inflation and would be paying close attention to the labor market at upcoming meetings. Staff Forecasts cut June 2019 GDP growth forecast from 2.5% to 1.75% and cut Dec 2019 GDP growth forecast from 3.0% to 2.75%. Raised June 2019 Headline CPI forecast from 1.25% to 1.75%, maintained June 2020 Core inflation forecast at 2.0% and cut June 2021 Core inflation from 2.25% to 2.0%

Europe/Mideast:

  • Italy Fin Min Tria: EU’s fiscal compact should be scrapped because it has negative effect on economy
  • EU officials said to be worried about new Greece tax and spending proposals

Americas:

  • President Trump stated that had received a letter from China President Xi and planned to speak with the Chinese leader by phone as trade talks continued

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +1.05% at 379.52, FTSE +0.84% at 7,268.00, DAX +1.11% at 12,106.97, CAC-40 +0.84% at 7,267.75, IBEX-35 +0.67% at 9,156.13, FTSE MIB +0.99% at 21,022.50, SMI +1.21% at 9,544.50, S&P 500 Futures -0.16%]
  • Market Focal Points/Key Themes: European Indices trade higher this morning, tracking the pullback seen in Wallstreet overnight, and a mixed session in Asia. Indices have steadily drifted higher despite ongoing trade tensions. On the corporate front GEA Group trades sharply higher after a strong rise in profits; Altice Europe also gains sharply after earnings and affirmed outlook; British Airways parent IAG rises over 4% on confirmed outlook while Bechtle, Hochtief, UnipolSali and Unipol Gruppo, and Sweco are among other names rising on earnings. Meanwhile Awilco declines on earnings with Lonmin also declining on earnings. In other news ThyssenKrupp gains almost 10% after reports its to abandon planned separation of Industrials, Materials units; Lafarge Holcim gains on the divestment of its Phillipines unit, while Ambu declines sharply after the stepping down of its CEO. Looking ahead notable earners include JD.com, Marriott International and Cars.com among others.

Equities

  • Consumer discretionary: Deutsche Post DHL [DPW.DE] -1% (earnings), IAG [IAG.UK] +3% (earnings; load factor), Thomas Cook [TCG.UK] +5.5% (bids speculation), Ambu [AMBUB.DK] -12% (new CEO), Bechtle [BC8.DE] +6% (earnings), GEA Group [G1A.DE] +8.5% (earnings; job cuts), Air France-KLM [AF.FR] +1% (load factor), Moncler [MONC.IT] +3% (Sales)
  • Financials: Danske Bank [DANSKE.DK] -3% (new CEO), Natixis [KN.FR] +2.5% (earnings)
  • Industrials: ThyssenKrupp [TKA.DE] +7% (to abandon planned units separation; to consider another unit IPO)
  • Telecom: Iliad [ILD.FR] +4% (analyst action)

Speakers

  • ECB’s Hansson (Estonia) saw green shoots in recent regional data and would wait and see how economy develops in coming months. Saw no urgency to have discussion on ECB policy and that TLTRO terms should keep door open on normalization. He cautioned that negative rate tiering could lead to over engineering
  • Czech Central Bank May Minutes: Large majority assessed that risks were broadly balanced; next rate movement could be in either direction
  • China Foreign Ministry spokesperson Geng Shuang stated that was not aware of any planned phone call between Xi-Trump

Currencies/Fixed Income

  • The implementation of US tariffs saw risk aversion sentiment abate a bit for the time being. Dealers noted that some time remained for negotiations as the higher tariffs on $200B of China goods would apply to products exported from Friday, May 10th (not goods that are already in transit) and would give negotiators a window of 2-4 weeks to reach a deal before the bulk of the pain commences. China did announce that it would retaliate but no specific measures were presented yet.
  • EUR/USD remained above the 1.12 level in subdued trading and poised for its 2nd week of gains.
  • GBP has been softer throughout the trading week as expectations of a Brexit compromise evaporated. UK Q1 GDP data was in-line with expectations and did show an improvement on a quarterly basis but was largely attributed to stockpiling ahead of Brexit
  • USD/JPY steady but holding below the 110 level

Economic Data

  • (NL) Netherlands Mar Manufacturing Production M/M: -0.5% v -0.4% prior; Y/Y: -1.0% v +0.1% prior; Industrial Sales Y/Y: -3.8 v -3.4% prior – (FI) Finland Mar Industrial Production M/M: -0.1 v -0.7% prior; Y/Y: -1.3% v +0.8% prior
  • (DE) Germany Mar Current Account Balance: €30.2B v €26.0Be; Trade Balance: €22.7B v €20.0Be; Exports M/M: +1.5% v -0.4%e; Imports M/M: 0.4% v 0.5%e
  • (NO) Norway Apr CPI M/M: 0.4% v 0.4%e; Y.Y: 2.9% v 2.9%e
  • (NO) Norway Apr CPI Underlying M/M: 0.4% v 0.3%e; Y/Y: 2.6% v 2.5%e
  • (NO) Norway Apr PPI (including Oil) M/M: +0.7% v -2.1% prior; Y/Y: 2.6% v 5.2% prior
  • (DK) Denmark Apr CPI M/M: 0.3% v 0.4%e; Y/Y: 1.0% v 1.1%e
  • (DK) Denmark Apr CPI EU Harmonized M/M: 0.3% v 0.1% prior; Y/Y: 0.9% v 1.2% prior
  • (FR) France Mar Industrial Production M/M: -0.9% v -0.5%e; Y/Y: -0.9% v -0.1%e
  • (FR) France Mar Manufacturing Production M/M: -1.0% v 1.1% prior; Y/Y: 0.5% v 2.8% prior
  • (FR) France Q1 Preliminary Wages Q/Q: 0.7% v 0.3%e; Private Sector Payrolls Q/Q: 0.2% v 0.2%e
  • (CN) Weekly Shanghai copper inventories (SHFE): 194.2K v 211.6K tons prior
  • (CZ) Czech Apr Unemployment Rate: 2.7% v 2.8%e
  • (SE) Sweden Mar Household Consumption M/M: -0.2% v -0.1% prior; Y/Y: 0.4% v 1.6% prior
  • (IT) Italy Mar Industrial Production M/M: -0.9% v -0.8%e; Y/Y: -1.4% v -0.8%e; Industrial Production NSA Y/Y: -3.1% v +0.9% prior
  • (UK) Q1 Preliminary GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.8% v 1.8%e
  • (UK) Mar GDP M/M: -0.1% v 0.0%e
  • (UK) Q1 Preliminary Private Consumption Q/Q: 0.7% v 0.5%e; Government Spending Q/Q: 1.4% v 0.4%e; Gross Fixed Capital Formation Q/Q: +2.1% v -0.3%e; Exports Q/Q: 0.0% v 1.7%e; Imports Q/Q: 6.8% v 4.5%e
  • (UK) Mar Visible Trade Balance: -ÂŁ13.7B v -ÂŁ13.7Be; Overall Trade Balance: -ÂŁ5.4B v -ÂŁ4.6Be; Trade Balance Non EU: -ÂŁ4.4B v -ÂŁ5.4Be
  • (UK) Mar Industrial Production M/M: 0.7% v 0.1%e; Y/Y: 1.3% v 0.5%e
  • (UK) Mar Manufacturing Production M/M: 0.9% v 0.0%e; Y/Y: 2.6% v 1.1%e
  • (UK) Mar Construction Output M/M: -1.9% v -0.9%e; Y/Y: 3.2% v 4.5%e
  • (UK) Q1 Preliminary Total Business Investment Q/Q: +0.5% v -0.7%e; Y/Y: -1.4% v -2.7%e
  • (UK) Mar Index of Services M/M: -0.1% v +0.1%e; 3M/3M: 0.3% v 0.4%e
  • (IS) Iceland Apr International Reserves (ISK): 756B v 765B prior
  • (GR) Greece Apr CPI Y/Y: 1.0% v 0.9% prior; CPI EU Harmonized Y/Y: 1.1% v 1.0% prior
  • (GR) Greece Mar Industrial Production Y/Y: -2.7% v +3.0% prior
  • (IT) Italy Mar Retail Sales M/M: -0.3% v +0.1%e; Y/Y: -3.3% v +1.0%e

Fixed Income Issuance

  • (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 12-month bills; Avg Yield: 0.122% v 0.070% prior; Bid-to-cover: 1.60x v 1.59x prior
  • (IN) India sold total INR170B vs. INR170B indicated in 2024, 2029, 2043 and 2049 bonds

Looking Ahead

  • 05:30 (IT) ECB’s Visco (Italy) in Paris
  • 06:00 (PT) Portugal Mar Trade Balance: No est v -ÂŁ1.5B prior
  • 06:00 (UK) DMO to sell €4.0B in 1-month, 3-month and 6-month bills ÂŁ0.5B, ÂŁ1.0B and ÂŁ2.5B respectively)
  • 06:30 (IS) Iceland to sell Bonds – 06:45 (US) Daily Libor Fixing
  • 07:00 (BR) Brazil May IGP-M Inflation (1st Preview): 0.5%e v 0.6% prior
  • 07:30 (IN) India Weekly Forex Reserves w/e May 3rd
  • 08:00 (IN) India Mar Industrial Production Y/Y: No est v 0.1% prior
  • 08:00 (BR) Brazil Apr IBGE Inflation IPCA M/M: 0.6%e v 0.8% prior; Y/Y: 5.0%e v 4.6% prior
  • 08:00 (UK) Baltic Bulk Index
  • 08:00 (IN) India announces upcoming bill issuance (held on Wed)
  • 08:30 (US) Apr CPI M/M: 0.4%e v 0.4% prior; Y/Y: 2.1%e v 1.9% prior
  • 08:30 (US) Apr CPI Ex-Food/Energy M/M: 0.2%e v 0.1% prior; Y/Y: 2.1%e v 2.0% prior
  • 08:30 (US) Apr CPI Index NSA: 255.809e v 254.202 prior; CPI Core: 261.884e v 261.374 prior
  • 08:30 (US) Apr Real Avg Hourly Earning Y/Y: No est v 1.3% prior; Real Avg Weekly Earnings Y/Y: No est v 1.3% prior
  • 08:30 (CA) Canada Apr Net Change in Employment: +11.6Ke v -7.2K prior; Unemployment Rate: 5.8%e v 5.8% prior; Full Time Employment Change: No est v -6.4K prior; Part Time Employment Change: No est v -0.9K prior; Participation Rate: 65.7%e v 65.7 prior; Hourly Wage Y/Y: 2.3%e v 2.3% prior
  • 08:30 (CA) Canada Mar Building Permits M/M: +2.4%e v -5.7% prior
  • 08:30 (CL) Chile Central Bank Economists Survey
  • 08:30 (US) Fed’s Brainard (voter, dove) at conference
  • 09:00 (MX) Mexico Mar Industrial Production M/M: No est v 0.3% prior; Y/Y: No est v -0.8% prior; Manufacturing Production Y/Y: No est v 1.1% prior
  • 09:00 (US) Fed’s Bostic (dove, non-voter) on Economic Outlook
  • 10:00 (US) Fed’s Williams (moderate, voter) at Bronx breakfast meeting
  • 10:30 (FR) ECB’s Coeure (France)
  • 12:00 (US) World Agricultural Supply and Demand Estimates (WASDE)
  • 13:00 (US) Weekly Baker Hughes Rig Count data
  • 14:00 (US) Apr Monthly Budget Statement: $160.5B v -$146.9B prior
  • (MX) Mexico Apr Nominal Wages: No est v 6.5% prior
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