Goldman Puts Probability of Higher Tariffs on Chinese Goods at 60%

Goldman Sachs economists said on Friday they placed a 60 percent chance the Trump administration would impose duties on an additional $200 billion worth of Chinese imports that were recently targeted.



“While very uncertain, we would expect the tariffs could be imposed as soon as late September but possibly not until after the election,” they wrote in a research note.

via Reuters

Kuwait Could Reach Emerging Market Status

Kuwait has long been nicknamed the Sleeping Giant of the Gulf, and it is not exactly intended as a compliment. Kuwait is considered one of the least interesting of the Mideast regional economies and has done little to attract foreign investment. But that reputation might be set for a change.

Kuwait’s stock market is being considered for a bump-up to emerging markets status by major index providers, and that would be a significant reclassification within the world of investors. Index funds tracking emerging markets benchmarks, and active fund assets benchmarked against emerging markets indexes, are far larger in size and popularity than frontier markets portfolios.


West Texas Intermediate graph

There are 30 exchange-traded funds tracking EM benchmarks, and the three largest ETFs tracking the MSCI and FTSE emerging markets indexes have roughly $135 billion in assets between them. There are two frontier market ETFs with a total asset base of roughly $600 million. Kuwait is the largest country weight in the MSCI and FTSE frontier markets index, at over 21 percent and 19 percent, respectively.

In June, MSCI said it would place the MSCI Kuwait Index under review for a potential reclassification from frontier markets to emerging markets status in 2019. Rival index provider FTSE Russell hasn’t classified Kuwait historically, but starting September of this year, it will be classified as a secondary emerging market — it also has an advanced emerging market group.

via CNBC

Oil Ends Week Lower on End of Supply Disruptions

Oil prices were set for a second straight week of decline on Friday after Libyan ports reopened and on the view that Iran might still export some crude despite U.S. sanctions.


West Texas Intermediate graph

Brent crude LCOc1 was down 10 cents at $74.35 per barrel by 1308 GMT, having fallen earlier by 1.3 percent. It was heading for a weekly fall of around 3 percent.

U.S. benchmark West Texas Intermediate crude CLc1 was up 10 cents at $70.43, and was on course for a weekly decline of around 4 percent.

Oil approached $80 in late June and early July due to Libyan and Venezuelan supply disruptions and fears the United States would press all buyers of Iranian oil to cut imports to zero from November.

But prices weakened in recent days as OPEC member Libya reopened its ports in the east and U.S. Secretary of State Mike Pompeo said Washington would consider granting waivers to some of Iran’s crude buyers.

via Reuters

Chinese Firms Exported More to US Ahead of Tariffs

China’s trade surplus with the United States swelled to a record in June as its overall exports grew at a solid pace, a result that could further inflame a bitter trade dispute with Washington.

But signs exporters were rushing shipments before tariffs went into effect in the first week of July suggest the spike in the surplus was a one-off, with analysts expecting a less favorable trade balance for China in coming months as duties on exports start to bite.



The data came after the administration of U.S. President Donald Trump raised the stakes in its trade row with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports, including numerous consumer items.

China’s trade surplus with the United States, which is at the center of the tariff tussle, widened to a record monthly high of $28.97 billion, up from $24.58 billion in May, according to Reuters calculations based on official data going back to 2008.

The record surplus “won’t help already sour relations and escalating tensions”, Jonas Short, head of the Beijing office at Everbright Sun Hung Kai, wrote in a note.

via CNBC

USD Rises on Trade War Concerns

The euro fell to a nine-day low on Friday after data showing a record Chinese trade surplus stirred worries about a deeper United States-China trade conflict, encouraging investors into the safety of the dollar.



The Chinese yuan, which has suffered in the past six weeks on concern that U.S. tariffs on Chinese goods will eventually hit its economy, reversed earlier gains in Asia and fell half a percent in offshore markets CNH=.

U.S. Treasury Secretary Steven Mnuchin said on Thursday that the United States and China could reopen trade talks, briefly easing concerns about the trade dispute.

But data showing China’s trade surplus with the United States swelled to a record in June as exports grew could further inflame tensions. Trump this week pledged to impose tariffs on $200 billion more of Chinese imports and Beijing has vowed to retaliate.

via Reuters

What sparked the dollar rally ? ( OANDA Trading Podcast on Money FM 89.3)

Stephen Innes Head of Trading Asia tells Michael Switow why the yen is weak, and stocks are rallying.

Money FM Singapore 89.3

 

 

USD/CAD – Canadian dollar dips, US consumer confidence next

The Canadian dollar has posted losses in the Friday session, erasing the gains from the Thursday session. Currently, USD/CAD is trading at 1.3197, up 0.31% on the day. There are no Canadian releases on the schedule. In the U.S, the key event is UoM Consumer Sentiment, which is expected to dip to 98.1 points.

Federal Reserve Chair Jerome Powell gave the U.S economy a solid report card on Thursday. In a radio interview, Powell said that the economy is “in a really good place”, pointing to President Trump’s massive tax cut scheme and increased spending as key factors in boosting economic growth. Powell did not address monetary policy and said he was uncertain as to the effects of the current trade disputes which has embroiled the U.S and its trading partners. The Fed will likely press the rate trigger in the second half of the year, but it is an open question as to whether we’ll see one hike over the next six months. The Fed is projecting growth of 2.8% in 2018, compared to 2.3% in 2017. Powell will be in the spotlight next week when he appears for his semi-annual testimony before Congress.

After weeks of hints, the Bank of Canada pressed the rate trigger on Wednesday. The hike of 25 basis points raised the benchmark rate to 1.50%, its highest level since December 2008. The Bank followed up with a hawkish rate statement, as policymakers noted that the economy continues to operate close to capacity. The BoC has upwardly revised its growth forecast for Q2 from 2.5% to 2.8%, and projected inflation to climb to 2.5%, before falling to 2% in the second half of 2019. As for the escalating trade war, the BoC said that U.S tariffs on steel and aluminum and retaliatory tariffs by Canada would lower economic growth. However, the effect of the tariffs would be modest, due to strong global demand and high commodity prices. Despite the rate hike and hawkish comments from the BoC, the Canadian dollar lost ground against the greenback on Wednesday.

  The sky hasn’t fallen just yet

  First signs of tariffs impact in China’s June trade numbers

Friday (July 13)

  • 8:30 US Import Prices. Estimate 0.1%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.1
  • 10:00 US Preliminary UoM Inflation Expectations
  • 11:00 US Fed Monetary Policy Report

*All release times are DST

*Key events are in bold

 

USD/CAD for Friday, July 13, 2018

USD/CAD, July 13 at 6:55 DST

Open: 1.3155 High: 1.3205 Low: 1.3152 Close: 1.3197

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2970 1.3067 1.3160 1.3292 1.3436 1.3530

In the Asian session, USD/CAD ticked lower but then recovered. The pair has edged higher in European trade

  • 1.3160 is providing support
  • 1.3292 is the next line of resistance
  • Current range: 1.3160 to 1.3292

Further levels in both directions:

  • Below: 1.3160, 1.3067, 1.2970 and 1.2831
  • Above: 1.3292, 1.3436 and 1.3530

Markets higher as earnings season gets underway

Earnings season eyed as trade war fears remain

We’re seeing some risk appetite return on Friday even as concerns about trade remain front and centre and shows no signs of improving.

European equity markets are trading in the green on Friday, taking the lead from the US session on Thursday where tech stocks drove a rally that saw the NASDAQ hit a record high. With earnings season getting underway, investors will be looking for reasons to be more optimistic having spent months reading about the risks that a trade war poses to the economy.

JP Morgan, Citigroup and Wells Fargo will kick things off today and over the coming weeks, investors will be paying close attention not just to the results but also references to trade tariffs and the impact they are expected to have on future results, particularly those that have already been targeted in counter-measures taken or proposed against the US.

DAX steady as investors search for cues

Sterling slips as Trump warns of risks to US/UK trade deal

Trump has very much been in the spotlight this week, attending the NATO summit in Brussels before heading over to the UK to meet Prime Minister Theresa May. As ever, Trump was not afraid to express his views on the UK and Brexit ahead of the visit, warning that a trade deal with the US would not be possible under the model that May is seeking with the European Union, while also expressing his belief that Boris Johnson would make a good PM. This appears to have weighed on the pound in trade on Friday given the complications it could cause May and her team.

None of this will go down well with May – who has previously pushed strongly for this visit despite much protest – and comes at a terrible time for her but as Trump well knows, she is in a very weak position right now and is unlikely to fight back and, more importantly, he wants a Brexit that best suits the US. Whether Trump’s comments give more voice to dissenters among Brexiteers is yet to be seen but it certainly doesn’t help the PM as a trade deal with the US has long been touted as one of the benefits of leaving the EU.

First signs of tariffs impact in China’s June trade numbers

Chinese trade surplus increases as Trump plans more tariffs

Chinese trade data released overnight may be used as a source for Trump’s next attack on the world’s second largest economy, with exports having soared once again – rising 11.3% – increasing the surplus the country has with the US to $41.61 billion in June. While the main reason for such a spike is likely to be exporters front loading sales ahead of the tariffs being implemented, it’s likely that a stronger US economy and weaker yuan is also playing a role.

I expect this will be used as another example of the bad trade policies that Trump has repeatedly references but been unable to so far influence. Trump is attempting to force them back to the table with threats of another $200 billion in tariffs, something that has so far only been met with retaliation from China and others.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

DAX steady as investors search for cues

The DAX index is showing limited movement in the Friday session. Currently, the DAX is at 12,510, up 0.14% on the day. On the release front, there are no major German or eurozone events. The German Wholesale Price Index dipped to 0.5% in June, down from 0.8% a month earlier. This edged above the estimate of 0.4%.

European equity markets held their own this week, and the DAX and the CAC indexes have shown little movement over the week. Still, the trading tensions hovering in the air have many investors wondering if this is the calm before the storm. On Tuesday, the Trump administration said it was considering imposing tariffs on some $200 billion in Chinese goods, which would be a significant escalation in the trade war between the two economic giants. China has promised to respond with “firm and forceful measures”, but hasn’t provided any details. With neither side showing any flexibility, the markets could be heading for stormy waters if China retaliates.

At last month’s ECB policy meeting, the markets finally received some clarity with regard to the Bank’s asset-purchase program (QE). ECB President Mario Draghi said that the ECB would taper the purchases from EUR 30 billion to 15 billion in September, and terminate the program completely in December. True to form, Draghi left open the possibility of extending QE if needed. Still, with the eurozone economy generally performing well and inflation up to 1.7%, the markets are optimistic that the ECB will wind up QE on schedule. That means that attention is focusing on the timing of a rate hike. At the June meeting, the ECB said it would keep hold rates at current levels “through the summer” of 2019, but this wording is vague, leaving the precise timing open to debate. Does this phrase mean that that the ECB will wait until the October meeting, or could the ECB raise rates during the summer, if conditions warrant a hike? ECB policymakers will be carefully monitoring growth and inflation data in the eurozone, with strong numbers reinforcing the case to raise interest rates sooner rather than later.

  The sky hasn’t fallen just yet

  First signs of tariffs impact in China’s June trade numbers

Economic Calendar

Friday (July 13)

  • 2:00 German WPI. Estimate 0.4%
  • All Day – ECOFIN Meetings

*All release times are DST

*Key events are in bold

DAX, Friday, July 13 at 6:10 DST

Previous Close: 12,492 Open: 12,539 Low: 12,498 High: 12,584 Close: 12,521

EUR/USD – Euro heads downward, investors eye US consumer confidence

EUR/USD has posted losses in the Friday session. Currently, the pair is trading at 1.1615, down 0.48% on the day. In economic news, German Wholesale Price Index dipped to 0.5% in June, down from 0.8% a month earlier. Still, this beat the estimate of 0.4%. In the U.S, the key indicator is UoM Consumer Sentiment, which is expected to dip to 98.1 points.

At the ECB’s June policy meeting, Mario Draghi spelled out his plans to wind up the Bank’s asset-purchase program (QE). Draghi said that the ECB would taper the purchases from EUR 30 billion to 15 billion in September, and terminate the program completely in December. True to form, Draghi left open the possibility of extending QE if needed. Still, with the eurozone economy generally performing well and inflation up to 1.7%, the markets are optimistic that the ECB will wind up QE on schedule. That means that attention is focusing on the timing of a rate hike. At the June meeting, the ECB said it would keep hold rates at current levels “through the summer” of 2019, but this wording is vague, leaving the precise timing open to debate. Does this phrase mean that that the ECB will wait until the October meeting, or could the ECB raise rates during the summer, if conditions warrant a hike? ECB policymakers will be carefully monitoring growth and inflation data in the eurozone, with strong numbers reinforcing the case to raise interest rates sooner rather than later.

Jerome Powell spoke in a radio interview on Thursday, and gave the U.S economy as solid report card. Powell said that the economy is “in a really good place”, pointing to President Trump’s massive tax cut scheme and increased spending as key factors in boosting economic growth. Powell did not address monetary policy and said he was uncertain as to the effects of the current trade disputes which has embroiled the U.S and its trading partners. The Fed will likely press the rate trigger in the second half of the year, but it is an open question as to whether we’ll see one hike over the next six months. The Fed is projecting growth of 2.8% in 2018, compared to 2.3% in 2017. Powell will be in the spotlight next week when he appears for his semi-annual testimony before Congress.

  The sky hasn’t fallen just yet

  First signs of tariffs impact in China’s June trade numbers

EUR/USD Fundamentals

Friday (July 13)

  • 2:00 German WPI. Estimate 0.4%. Actual 0.5%
  • All Day – ECOFIN Meetings
  • 8:30 US Import Prices. Estimate 0.1%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.1
  • 10:00 US Preliminary UoM Inflation Expectations
  • 11:00 US Fed Monetary Policy Report

*All release times are DST

*Key events are in bold

EUR/USD for Friday, July 13, 2018

EUR/USD for July 13 at 4:35 DST

Open: 1.1672 High: 1.1675 Low: 1.1627 Close: 1.1615

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1312 1.1434 1.1553 1.1637 1.1728 1.1829

EUR/USD inched lower in the Asian session and has posted further losses in European trade

  • 1.1553 is providing support
  • 1.1637 is the next resistance line

Further levels in both directions:

  • Below: 1.1553, 1.1434 and 1.1312
  • Above: 1.1637, 1.1728, 1.1829 and 1.1910
  • Current range: 1.1553 to 1.1637