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The phoney trade war of the last year is over. President Donald Trump has dropped a dangerously real cluster bomb on China.
“The first of many,” he growled with defiant satisfaction as he signed off on the most dramatic trade sanctions since the Smoot-Hawley Tariff Act of 1930.
The dispute centres as much on who will control the technology life-blood of the 21st century as it does on China’s $375bn (£265bn) trade surplus with the US – almost half of America's $800bn trade gap and patently "out of control" in Mr Trump's words. He says it must be reduced by $100bn immediately.
What makes this so menacing is that the world’s two dominant superpowers are in a state of escalating hostility over both trade and the bigger issue of dominance in Asia, a toxic geo-strategic cocktail. (Telegraph – Continue Reading)
Equity bulls have been among Donald Trump’s most steadfast allies. Now they’re in revolt as overnight trading in futures shows no end to the pain incited by his trade belligerence.
Long driven by optimism fueled by Trump’s pro-business embrace, investors suddenly find themselves in his cross-hairs as tariffs on $50 billion of Chinese imports exact a price in indexes reliant on overseas sales. S&P 500 contracts slipped another 0.6 percent at 12:45 p.m. in Hong Kong as a second week of selling left stocks at risk for another monthly decline.
“I’m glad Americans got those massive tax cuts because we just lost it all in the stock market,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. “Tariffs mean a trade war and the news has the world’s investors running for the exits.”
Normally, the diverse provenance of earnings in U.S. megacaps is seen as a shield against the vicissitudes of the domestic economy. Inconveniently for Trump, who for 15 months has touted equities as a report card on his policies, it also leaves them particularly exposed to anxiety over trade. (Bloomberg – Continue Reading)
The Federal Reserve raised rates just 0.25 percentage points this week, but distortions in the money markets mean many borrowers are seeing their interest rates rise far faster.
The good news is that what look like flashing red alerts about imminent trouble for the banks are nothing of the sort. The bad news is that blockages in the plumbing of the financial system could lead to unpredictable ruptures as the markets adapt to a new monetary regime. (WSJ – Continue Reading)
As expected, companies in Europe’s largest economy have become less optimistic about their business prospects as the EU faces a possible trade war with the United States.
The March headline business climate index of IFO’s survey of German business leaders fell for the second straight month but came in slightly higher than expected. The index reading of 114.7 was a tenth of a point above market consensus but dropped from the 115.4 reading last month. The index first hit a record of 117.6 in November and repeated the result in January.
This month’s current assessment component of 125.9 compared with the 125.8 estimate and the upwardly revised reading of 126.4 last month. The component reached an all-time high of 127.8 in January. (LiveSquawk – Continue Reading)
The Bank of England's (BoE) Monetary Policy Committee (MPC) decided to keep rates on hold at the conclusion of its 21 March meeting, which was published a day later alongside the minutes.
The MPC voted 7-2 to maintain the Bank Rate at 0.5pct. The Committee voted unanimously to maintain stock of UK government bond purchases at GBP435Bln and the stock of corporate bond purchases at GBP10Bln. Two members of the MPC, Ian McCafferty and Michael Saunders - both widely regarded as hawks - broke away from the group and wanted to hike rates immediately, noting that evidence of near-zero slack and accelerating wage growth were clearly visible.
However, the breakaway should not be viewed as a softer line on the potential for higher rates. The majority of members, despite there being a few surprises in recent economic data, still believe "a modest tightening of monetary policy at this meeting could mitigate the risks from a more sustained period of above-target inflation," down the line.(LiveSquawk – Continue Reading)
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