Tariff War Concerns Rattle Investors

May 28, 2019

President Trump’s predisposition to fight a tariff war that he believes is winnable depressed the 10-year U.S. Treasury yield below 2.30% to its lowest level since October 2017 and weighed on European and Asian share prices. Equities fell 1.1% in Indonesia, 0.4% in New Zealand and 0.2% in Taiwan and Singapore. Stocks in Europe have fallen 0.9% in Italy, 0.5% in France, Italy and Switzerland and 0.3% in Germany. Not all stock markets fell however. Exceptions include China, Japan, Hong Kong, South Korea, Australia and India.

The dollar has been comparatively stable overnight, ticking up 0.2% against the yuan and loonie and 0.1% relative to the Swiss franc and sterling, holding steady against the euro, and dipping 0.2% versus the yen and 0.1% relative to the Australian and New Zealand dollars.

Among commodities, gold is flat while the price of WTI oil has risen 0.6%,

Economic sentiment in the euro area unexpectedly rebounded to 1.2 points to a 2-month high reading of 105.1 in May with improvement in industrial and sector business confidence and in consumer sentiment that outweighed a drop in the construction sector to a 17-month low.

On-year Euroland M3 money growth accelerated to 4.7% in April from 4.6% in March, 4.2% in February, and 3.8% in January. But growth in total credit slowed 0.1 percentage point to 2.4%.

Austria’s manufacturing purchasing managers index fell 0.9 points to a 50-month low of 48.3, as exports contracted for an eighth straight time.

A number of economies reported consumer confidence data:

  • French consumer confidence climbed by a greater-than-forecast three index points to a one-year high of 99 in May.
  • German consumer confidence slid 0.1 point from a downwardly revised May level to a 25-month low of 10.1 in June.
  • Swedish consumer sentiment tumbled 4.5 index points to 91 in May, the weakest reading since the end of 2012.
  • Portuguese consumer sentiment rose 0.3 points to a 3-month high in May of -9.0 but was still considerably weaker than last October’s score of minus 4.8.
  • Norwegian consumer confidence fell a half-point in the second quarter to its weakest level in two years and at 12.8 was well below its high of 20.3 in the first quarter of 2018.
  • South Korean consumer sentiment dropped 3.7 index points to a 4-month low in May of 97.9.

Swiss real GDP expanded twice as rapidly in the first quarter (0.6%) as in the final quarter of 2018, lifting the year-on-year growth rate to 1.7%, but that was still below last year’s average growth rate of 2.6%. The Swiss economy suffered a slight and brief contraction last summer. Last quarter’s growth acceleration was propelled mostly by construction.

The Swiss trade surplus in January-April of CHF 7.7 billion was 38% wider than a year earlier.

Sweden’s trade balance swung from a SEK 11.1 billion deficit in the first four months of 2018 to a SEK 15.5 billion surplus in the first third of 2019.

Japanese corporate service prices dipped 0.2% in April, lowering their 12-month rate of increase to an 11-month low of 0.9%.

German import price inflation slowed to a 3-month low of 1.4% in April from 1.7% in March, and import price inflation excluding crude and oil products fell 0.4 percentage points to only 0.6%.

Icelandic CPI inflation accelerated 0.3 percentage points to a 5-month high of 3.6% in May.

The menu of U.S. releases today includes the FHFA and Case-Shiller house price indices, the Conference Board’s consumer sentiment index, , and the Dallas Fed manufacturing index.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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