Once again we saw fairly steady markets across the globe yesterday as we moved another day closer to the implementation of US tariffs on China and a further escalation of trade tensions. The stock markets finished the day nicely in the black in both Europe and the US and look set to open higher in Asia this morning, the dollar dropped slightly but most currencies remained in familiar ranges and the US 10yr treasury yields held around 2.83%. We also had the Fed’s Meeting Minutes released which not surprisingly mentioned the increased risks of trade tensions, but also reaffirmed their commitment to gradual rate rises which keeps another 3 hikes firmly in line this year.
The market remained relatively calm, or even complacent in the views of some participants as President Trump showed no sign of any last minute reprieve on the tariff front overnight, advising the tariffs will go live at 12.01am Washington time today. Potentially more worryingly he advised reporters that an extra $16 bio of tariffs could follow in the next couple of weeks and the final total could reach up to $550 bio.
It’s a big day ahead for markets with not only the tariff situation on the radar but we also have the small matter of the latest US Non-Farm payroll report. Market expectation a rise of 195k new jobs, but last nights ADP figure and unemployment claims number may point towards a downside disappointment. Average Earnings numbers are also due and will be almost as much of a focus as the headline number this evening.
The Asian and London sessions are very thin on the ground in terms of fundamental data releases but volatility could increase exponentially if we start to see more headlines on the trade situation and the potential consequences of escalation into a full on global trade war. As we said earlier, the markets have remained relatively calm over the last few session but this could change and change swiftly as the tariff deadline approaches.