Market Movers today
Market focus will continue to be on trade war issues and the contents of the expected US Treasury report later this week on foreign investments. The market will follow the preparation of the EU summit, where notably immigration problems seem to be contentious between European leaders. The EU summit will possibly also touch on an EU-wide response to the likely US tariffs on European car exports to the US.
In the US, the conference board consumer confidence indicator for June is due to be released. Consensus expects confidence to remain at present high levels boosted by low unemployment and prospective tax cuts.
In Denmark, the May retail sales are released today. In Sweden, the PPI inflation reading is due.
Selected market news
The fear of a full-blown trade war is now the single most important factor for the direction on global financial markets. Importantly, yesterday we got the first indication albeit small that the Trump administration is not immune to the bearish market sentiment that pushed Nasdaq down more than 2.2 % yesterday.
White House trade adviser Peter Navarro said on CNBC that a Treasury Department to be published later in the week on American restrictions on foreign investments will not be as damaging to growth as markets are anticipating. Navarro underlined that ‘there are no plans to impose investment restrictions on any countries that are interfering in any way with our country. This is not the plan the whole idea that we’re putting investment restrictions on the world please discount that all we’re doing here with the president’s trade policy is trying to defend our technology when it may be threatened’.
However, we doubt that the words from Navarro will be enough to calm market fears. China and the EU yesterday raised concerns that the protectionism risks pushing the world economy into recession and Harley Davidson said it would move some production out of the US to avoid new EU tariffs on its motorcycles. Note that earlier in the day, Treasury Secretary Steven Mnuchin had tweeted indicating that the administration would not focus its restriction efforts solely on China but on all countries. In addition, White House Press Secretary Sarah Sanders pointed in that direction.
Despite the poor equity sentiment in the US and a spike in VIX volatility, the support to US treasuries was modest. The 10Y treasury yield dropped just one bp though the 2Y10Y curve continued to flatten and is now at 34bp. USD/JPY has continued to move lower and Nikkei is down 0.5% at the time of writing.
The interviews with influential ECB members continue and this time it is Benoît Coeuré in Le Figaro . He argues that growth is still robust but also warns that’ …there is increasing uncertainty arising from tensions in world trade as well as the risk of volatility in the financial markets and in certain emerging economies, and we have to take all that into account’. He also says that QE reinvestment needs will be c.EUR15bn a month in 2018.
