U.S. Flinches on Threatened Trade War

May 21, 2018

Treasury Secretary Mnuchin said on Sunday talk show that plans to impose massive tariffs on Chinese imports were being suspended amid progress on negotiations.

Monday’s other meaningful development has been another 2-basis point increase in the 10-year Treasury yield in futures trading. That rise contrasts with decreased 10-year sovereign debt yields of a basis point in the U.K. and Japan.

Germany and Switzerland are observing Whit Monday, and it’s Victoria Day in Canada.

The dollar climbed by 0.8% against sterling, 0.6% versus the yen, 0.2% relative to the euro, yuan and Swiss franc and 0.1% vis-a-vis the peso  but has declined by 0.7% against the Australian dollar and 0.1% versus the kiwi. The loonie is steady.

In stock market action around the Pacific Rim, equities rose 1.3% in Taiwan, 0.6% in China, 0.5% in Singapore, 0.4% in South Korea and 0.3% in Japan but fell by 0.9% in Indonesia, 0.8% in India and 0.6% in New Zealand. Share prices in Europe are up 0.8% in the U.K., 0.7% in France, and 0.1% in Spain but down 0.3% in Italy and 0.1% in Greece.

Gold slipped 0.6% to start the week, while WTI oil firmed 0.2%.

Japan’s customs trade surplus of JPY 626 billion in April was 30.9% wider than a year earlier. Exports rose 6.0% to Asia, 14.1% to the EU but just 4.3% to the United States. Total on-year export growth of 7.8% exceeded a 5.9% rise in imports. The seasonally adjusted JPY 550 billion surplus was larger than any of the monthly surpluses in the first quarter, which averaged JPY 359 billion. On a month-on-month basis, exports rebounded 4.6%, while imports fell 1.2%.

New Zealand retail sales volume edged up 0nly 0.1% last quarter versus a 1.4% advance in the final quarter of 2017, and the smaller 3.0% increase from a year earlier was the smallest on-year increase since the third quarter of 2012.

The British Rightmove house price index posted a lower 1.1% on-year rise in May, smallest since January when the 12-month increase was also 1.1%.

Real GDP growth in Thailand accelerated 0.8 percentage points to 4.8% last quarter, spurred by faster consumption and business investment. The on-year increase was up from 4.0% in 4Q17 and the fastest pace since the first quarter of 2013.

On-year growth of 9.3% in Polish industrial production during April was the most so far this year, and Polish PPI inflation also rose sharply to 1.1% in April from 0.5% in March and negative 0.3% in February.

South Korean producer prices only ticked 0.1% higher in April, but the 12-month PPI inflation rate picked up to 1.6% from 1.3% in both February and March.

The Chicago Fed National Activity index gets released today, and Harker and Kashkari are two Fed officials scheduled to speak publicly.

Copyright 2018, Larry Greenberg. All rights reserved.  No secondary distribution without express permission.

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