Tariff War
May 10, 2019
President Trump made good on his threat to lift tariffs on $200 billion of imports from China, and Beijing officials promise to answer in kind even as talks continue. Trump erroneously expects the U.S. economy to at worst react neutrally to an escalated tariff war, but that delusion only partly explains his likely motivation. The standoff between the White House and Congress was giving the president loads of bad attention, and a trade war with China changes the news cycle.
The dollar moved barely overnight, with 0.1% net downticks against the euro, Swiss franc, loonie and Australiand dollar. There were dollar drops also of 0.5% versus the peso and 0.2% relative to the yuan and kiwi. Sterling is unchanged, and the yen edged 0.1% lower against the dollar.
Share prices in Asia rebounded 3.1% in China and 1.2% in Hong Kong fut fell 0.3% in Japan. U.S. futures are lower. European markets rose 0.9% in Switzerland and Italy, 0.8% in France, 1.1% in Germany, and 0.7% in Spain.
WTI oil rose 0.6%. Gold edged 0.1% higher. Ten-year sovereign debt yields are up 2 basis points in the U.S., 1 basis point in Germany and the U.K., but not at all in Japan.
Turning to data released overnight:
British real GDP growth accelerated to 0.5% on quarter in 1Q and 1.8% on year, which is more than any quarter during 2018. All components of demand expanded faster than anticipated last quarter.
British industrial production advanced 0.7% on month in March and 1.3% from a year earlier. On-year growth in factory output of 2.6% in March was the most in 16 months.
British construction output, however, dropped 1.9%, although the year-on-year growth of such stayed at 3.2% in March.
The British goods and services trade deficit narrowed to GBP 5.408 billion in March from GBP 6.219 billion in February and GBP 6.710 billion in January. Trade in just merchandise goods generated a deficit of GBP 13.65 billion in March.
Germany’s current account and trade surpluses in March were each greater than forecast. The current account surplus equaled EUR 30.2 billion. The seasonally adjusted trade surplus averaged EUR 19.1 billion per month last quarter compared to monthly means of EUR 18.7 billion in 4Q18 and EUR 17.6 billion last summer.
French industrial production sank 0.9% on month in March and was only 0.5% higher than a year earlier. Italian industrial output also dropped 0.9% in March and posted a 1.4% year-on-year decline. Greek industrial production edged 0.2% higher but was 2.7% lower than in March 2018.
Italian retail sales fell 0.3% in March to 3.3% below its year-earlier level.
Norwegian CPI inflation in April of 2.9% matched March’s 9-month low. Danish CPI inflation slipped 0.2 percentage points further to a 4-month low of 1.0% in April.
Japanese real household spending in March showed accelerated year-0n-year growth of 2.1%, but labor cash earnings posted value and volume year-on-year declines of 1.9% and 2.5%.
Indonesia recorded a smaller current account deficit last quarter equal to a more manageable 2.6% of GDP.
Retail sales in Singapore were 1.0% lower than a year earlier in March. That was the fourth 12-month decrease in the past five reported months.
Today’s North American menu of data releases includes U.S. consumer prices and real wages, as well as Canadian unemployment, employment and housing permits.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British GDP and industrial production, French and Italian industrial production, German current account, U.S. import tariffs