Market movers today
Trade tensions between the US and China is still in focus. We are awaiting Trump’s response to the Chinese retaliation over the weekend, see also US-China trade: From ‘Grand Bargain towards ‘trade war’?, 18 June 2018.
At the Sintra conference on monetary policy Mario Draghi delivers an introductory speech at 10.00 CET and ECB’s Peter Praet is chairing a panel at 10.30.
In the afternoon US releases data on US housing starts and permits . In Scandi unemployment in Sweden is expected to show a small decline from 6.3% to 6.1% (seasonally adjusted).
Selected market news
The tensions between the US and China continue as President Trump is threatening to impose another USD 200bn in tariff on Chinese exports to the US. China has responded that they would retaliate with ‘strong counter measures’. Hence, the trade dispute continues and seems to be escalating. The equity markets responded negatively to the news as US equity futures and most Asian equity markets declined this morning. Furthermore, there was a modest strengthening of the yen and a decline in the oil price. So far the macro-economic impact of the trade tensions between the US and China has been limited, but it is seen having a big impact on global growth if it is allowed to escalate.
The oil price is under pressure not only from the ‘trade war’ between China and the US, but also from the expected increase in oil supply from OPEC although it is likely to be modest as OPEC has announced a proposal for a modest increase in the supply.
Hence, there are plenty of factors supporting the bond market at the moment and 10Y US Treasuries fell below 2.90% yesterday. On top of the overall positive seniment in the bond market we are seeing spreads between the EU peripheral government bonds and core -EU continue to grind tighter as there is limited news on the Italian future fiscal policy. The comments from the new Italian finance minister as well as the ECB meeting last week has been very supportive for Italian government bonds. We think that the markets are a bit complacent as we st ill need to see more evidence that Italy is committed to follow EU budget lines, but the risk is that we will not get more firm information before the autumn. In the meantime spreads continue to tighten.
