Market update:Trump allays trade war fears with 'friends tweet
Monday 9th of April 2018.
- First week of April a strong one for equities, despite ongoing ‘trade war’ fears between the US and China.
- Donald Trump tweets “President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its trade barriers because it is the right thing to do”.
- After the US detailed the $50bn of tariffs on Chinese goods, Beijing responded with its own targeted list. President Xi is set to comment on situation in speech on Tuesday.
- The Omnis view: we still believe this is a case of both sides posturing for negotiation. A full trade war is not in the interests of any nation.
- Widely followed non-farm payrolls measure shows US created 103,000 jobs in March, against analyst predictions of around 190,000.
- Employment increased in manufacturing, health care and mining, while retail trade and construction dipped.
- However, US labour market remains healthy with unemployment at 4.1% for sixth straight month.
- The Omnis view: the US economy remains in a strong state though market valuations reflect this.
- Train staff begin three months of nationwide rolling strikes in dispute over government’s planned overhaul of state-run railway SNCF.
- It’s the latest of Emmanuel Macon’s economic reforms, and potentially the toughest challenge of his presidency so far.
- Macron is taking a pro-business and pro-liberalisation stance as he looks to modernise the French economy and fix troublesome public finances.
- The Omnis view: these measures may cause temporary pain for Macron’s popularity, but the reforms are needed to modernise France’s labour practices.
- A month on from the Italian election, which ended in a hung parliament, fresh talks are underway to form a coalition government.
- Anti-establishment 5-Star Movement were largest single party, with leader Luigi Di Maio calling on his Democratic Party rivals to “bury the hatchet” and consider a governing coalition with his party.
- However, Italy’s three rightist parties - the League, Brothers of Italy and Silvio Berlusconi’s Forza Italia - have presented a new united front with hopes of an alliance.
- The Omnis view: the formation of an Italian government may take some time and its makeup does not seem to bother investors at present.
- EU statistics agency Eurostat said unemployment across 19 eurozone countries fell to 8.5% in February, from 8.6% the previous month – the lowest level since December 2008.
- The number of people out of work fell by 141,000 to below 14 million.
- While unemployment was down, annual eurozone inflation jumped to 1.4% in March, ending several months of decline.
- The Omnis view: we are encouraged by the eurozone’s ongoing reduction in unemployment, though no central bank action is likely while inflation remains below 2%.
LOOKING AHEAD - TALKING POINTSUS FED MINUTES AND INFLATION FIGURES DUE
- On Wednesday, the Federal Reserve (Fed) will release minutes from its March 20-21 meeting, when it voted unanimously to raise its benchmark federal-funds rate to a range of between 1.5% and 1.75%.
- On Friday, Fed chairman Jerome Powell reaffirmed the central bank’s slow and steady path of raising interest rates. The March meeting minutes likely will reflect plans to continue this pace.
- Analysts are predicting the US core reading of inflation is set to hit 2% for March, matching the Fed’s target.
- The Omnis view: US inflation looks to be under control, so we would expect no more than two more rate rises in 2018.
- While trade war rhetoric dominates headlines, China will release latest year-on-year data on imports and exports on Friday.
- Analysts predict exports were down markedly in March from the 44.5% growth in February, leading to a smaller trade surplus.
- Distortions in year-on-year trade growth that impacted February’s figures were caused by the festivities around the lunar new year.
- The Omnis view: President Xi Jinping is unlikely to announce market reforms to heal US/China trade relations at a speech on Tuesday. We await talks between the two sides.
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