EUR 8.70 For Business Accounts Only

The Morning Track tit-for-tat-2

- The Morning Track – Tit-for-Tat by Bob Savage
http://trackresearch.com/articles/the-morning-track-tit-for-tat-2/

There was a 1935 short comedy film from Laurel and Hardy about escalating revenge chaos in big business – perhaps we all need a movie break before starting today. We are all watching planes and grains as the Chinese tit-for-tat on US tariffs spooks markets back into trade war alert. US details 25% tariffs on $50bn of Chinese imports from TVs to chemicals set to hit May 22 unless there is real progress on talks. China plans reciprocal tariffs on 106 US products equal to $50bn including soybeans and airplanes. The US stock futures are lower, bonds higher, USD mixed with JPY gaining, while commodity-linked AUD and CAD are lower with oil, copper and grains sharply weaker. Focus beyond the trade battle rests on weaker data – with Service PMI misses in Japan and China, big drop in UK Construction PMI, lower than hoped flash core-HICP in the Eurozone and mixed Australian data with retail sales better but housing approvals worse. Trends for global growth aren’t friendly to
higher inflation hopes, driving more bond buying, with European yields dropping to 16-month lows again. The politics of Europe also back in play with Macron facing the Spring strikes with rail the first salvo, airlines the second – likely hurting growth further. The markets are going to look at the US S&P500 200-day as the pivotal resistance now and fear of a larger move lower in risk dominates today. The question is whether the US bond yields can make up for this pain trade with 2.72% and 2.62% 10Y the next targets. For the USD, lower yields, lower US policy support from allies all mixes together for the USD confusion. FX hasn’t been reacting to the volatility spike in equities, maybe that changes with focus on JPY being the key again. Watching 105.50 for more sparks.