Stock markets and risk trades retreated slightly over the course of yesterday’s trading as the every present trade tensions between China and the US once again came to the fore with China confirming that it will impose 25% tariffs on US imports from August 23. This of course a tit for tat retaliation to the US administrations latest move. The Oil market was hit hard as Crude dived as much as 4% despite a decline in US inventories. China’s tariffs will apply to billions of dollars of US gasoline, diesel and other oil derivatives but interestingly not actual crude.
In a further escalation of global tensions, the US will increase sanctions against Russia if a fresh bill comes to law, nicknamed the ‘bill from hell’ it comes in light of recent nerve agent attacks in the UK but will also have been influenced by Russian meddling in the US election. The ruble took a big hit on the news and investors will be paying close attention to any further escalation as we move forward.
This morning we had the latest RBNZ rate announcement and to no one’s surprise, rates were kept on hold. What did hit the market was a more dovish than expected statement and press conference from Governor Orr where he advised that they expect to keep rates at this level for two more years. The RBNZ also lowered it’s growth forecast as business confidence and the housing market cooled and the bank acknowledged global trade tensions and the risk they present to NZ’s export economy. The kiwi dollar slumped over 60 pips against the greenback and Aussie in short order and we’d expect the currency to remain offered over the short term as the market digests this latest update.
Looking ahead to today’s trading and once again expect the global trade situation to remain a strong focus. We have the Chinese CPI and PPI numbers due in the Asian session and then the US PPI data in the New York session but apart from those, fairly important pieces of data, investors will be keeping their eyes on the news wires for the next catalyst for market moves.