Equities and USD up on vague hopes of softening in US/China trade war

Good morning

Most global equity indices had a positive day yesterday, really only China markets were down in Asian trading overnight after a major bank issued a downgrade on Hong Kong stocks.  Currency markets have been reasonably calm, we had a bit of USD buying through the day yesterday and again overnight which saw GBPUSD trade down to 1.3245, EURUSD to 1.1310 and USDJPY up to 143.50.  The dollar has been unable to hold onto those gains, each of those pairs now trade 1.3280, 1.1350 and 142.70.  GBPEUR had been up to 1.1720, now back to 1.1700.

Trump continues to use more friendly language.  He backtracked on the idea of firing Powell, although has again said Powell is wrong in not lowering interest rates, and he has appeared far more open to a trade deal with China, going so far as to suggest he could cut tariffs to help de-escalate a trade war.  Even so, we are a long way from a deal being struck.  I do recall back in the early 2020’s US and China had signed the first stage of a trade deal. 

That deal was signed on 15th Jan 2020 Jan, but just five days later I wrote in my daily report ‘I’m more than a little worried about this virus outbreak in China……’.  As we know, Covid hit hard and any trade agreements were pretty much null and void as a result.  Those trade talks had taken an eternity to agree so I don’t expect any rapid solutions to this particular trade war.  China meanwhile is said to be close to lifting sanctions on EU officials in a hope to strike some sort of deal with the European trading bloc. 

On the subject of trade deals, UK is looking at reducing US car and farm tariffs in order to get a deal over the line, but will not accept their chlorinated chicken or hormone-treated beef.  I have seen a few snippets on Twitter that show ingredients for the same products in both the US and UK, and the difference is quite amazing.  Skittles and McDonalds chips are two that stick out.  Quite why the US put up with so many weird and even toxic ingredients is beyond me.  Regardless, BoEs Bailey has warned that even a UK/US trade deal wouldn’t be enough to save the UK from an economic slump. 

Trump’s attempts to find peace in Ukraine seems to be failing, for which he really seems to blame Ukraine which is a bit harsh given they are the country that has been invaded.  He has made it clear that Ukraine should accept Crimea is lost to Russia and we know he’d happily draw new borders to give Russia land taken during the invasion.   There was some talk that US might look to lift sanctions on Russia but this has since been denied.  Even so, the US does still seem to be on a very different page to Ukraine and Europe.

Arsenal could only manage a draw with Crystal Palace last night which means Liverpool require just one point from their last three matches in order to lift the premier league title.  Rather typically, their next match is against Spurs so to compound a pretty dire season, Spurs are very likely to be the team that finally hands the trophy to Liverpool.  Arsenal are almost assured of second place although statistically Man City and Forest could go above them, highly unlikely scenarios mind you.   Four points separate the five teams below Arsenal so there is everything to play for over the last two or three matches of the season.

Not the busiest calendar today , US durable goods is really the highlight.  Early tomorrow morning we’ll have UK retail sales.  I’m out this evening seeing the Book of Mormon, possibly the most un-PC show out there.  When I first saw it some years ago there was quite a large security presence due to threats made.  I’m not sure if that is still the case or whether it is now more accepted.   I’ll report back tomorrow.

Have a great day…

-  09.00 German IFO

-  11.00 German Buba monthly review

-  13.00 ECBs Nagel speaks

-  13.30 US durable goods, initial jobless claims

-  14.00 ECBs Lane speaks

-  14.25 BoEs Lombardelli speaks

-  15.00 US existing home sales

-  22.00 Feds Kashkari speaks

-  00.01 UK GfK consumer confidence

-  00.30 Japan Tokyo CPI

-  07.00 UK retail sales

Are we seeing a Trump u-turn?

Good morning

It felt like a bit of a holiday day yesterday and judging by the number of email bounce backs I got from sending my reports yesterday it would seem that many people are indeed still in a bit of holiday mode.  Most kids are back to school this week so those readers whose commute involves driving a car should prepare for a bit more traffic. 

The IMF meeting took most of the headlines yesterday, as they lowered global growth forecasts from 3.3% to 2.8%.  They said that US is likely to be hardest hit among advanced economies this year, with growth forecasts lowered from the 2.7% they forecast in January to just 1.8%.  Trump should take note from the IMF chief economist who made it clear that central banks should remain independent. 

This follows Trump’s attack on Powell that send the US markets lower on Monday, although we did see a rebound in US prices yesterday and European exchanges were generally up on the day as Trump suggested he had no plans to fire Feds Powell.  Trump also said he’d be ‘very nice’ to China if they came to the trade negotiations table, some talk of a Trump/Xi meeting in early May.  Asian equities were higher overnight and futures prices point to higher levels in global markets again today.

The US dollar was broadly unchanged with GBPUSD spending most of the day in the high 1.33’s and EURUSD in the high 1.14’s although into the London close there was a little USD buying that took those pairs off their highs and also helped USDJPY tick up to 141.25 from the morning low below 140.00.  IMF then said that it is possible the UK sees three rate cuts this year, driven by a slower economy despite sticky inflation.  UK growth forecasts slashed from 1.6% to 1.1%.

GBPUSD slipped below 1.3300 briefly, now 1.3315, although has fared better than its European neighbour which is currently 1.1395, leaving GBPEUR higher at just short of 1.1700, perhaps reports that US are negotiating a trade deal with the UK is helping GBP.  Markets seem to be ignoring the latest ONS government borrowing numbers which show a deficit of £152bn, some £15bn higher than the OBR forecast from just a month ago at Reeves spring statement.  Questions over Reeves fiscal policy faces some pretty serious questions.

Tesla stock price rose 5% yesterday as Musk announces he’ll reduce his DOGE role in the wake of a backlash against his electric vehicles.  With some more conciliatory talk coming from Trump and his White House crew, whether over China or Powell, I wonder whether this is a deliberate softening of approach given the widespread opposition the government policies have faced.  When I say ‘softening’, some would say ‘u-turn’.

Putin has suggested he is open to peace talks and says the Ukrainian invasion could be halted along the current front line.  It would seem that Putin would want the US, and the world, to agree that Crimea is recognised as part of Russia, rather than an illegal annex.  Ukraine will not want that, but it is becoming apparent there is little chance of peace unless Ukraine accept they will have to give up some ground.

Man City got a last minute win against Aston Villa last night which sent them into third just above Forest, while Villa’s chances of a top four or five finish are hit hard. Arsenal will be looking to secure their second place in the league as they take on Crystal Palace who have only won one league match in the last five they have played.

Today is all about PMI’s.  Up first is the EU release, UK follows 30 minutes later and then we have the US equivalent in the afternoon.  We’ll also hear from several central bank officials and UK Chancellor Rachel Reeves speaks at the IMF conference, let’s hope they don’t ask her too many difficult questions, I’m of course talking about CV based questions rather than her fiscal policy.

Anyone lucky enough to have gone to warmer climates over the Easter holidays will be brought smartly down to earth today, we’ve had some pretty heavy rain here and the forecast suggests it’ll take a few more hours to dry.  Looking ahead though, the very end of April in forecast to see temperatures above 20°c.  Other than this morning, we’ve not had bad weather recently, but it’s not been hugely warm.  I’m looking forward to May and some hotter weather.

Have a great day…

-  09.00 EU services, manufacturing PMIs

-  09.30 UK S&P services, manufacturing PMIs

-  11.30 BoEs Pill speaks

-  14.00 Feds Goolsbee speaks

-  14.30 Feds Muslaem speaks

-  14.35 Feds Waller speaks

-  14.45 US S&P services, manufacturing PMIs

-  15.00 US new home sales

-  18.15 BoEs Bailey speaks

-  19.00 BoEs Breeden speaks

-  19.00 Feds Beige book

-  20.15 ECBs Lane speaks

-  20.45 ECBs Cipollone speaks

Trump's attack on Fed's Powell send US equities and US dollar lower

Good morning

Welcome back to the real world after a long and rather lovely long Easter weekend.  Another weekend of birthday celebrations in the Evans household, this time my wife’s.  Headed over the Battersea Power Station and the surrounding area, well worth a visit if you’re ever looking for something to do.  OK, its a shopping centre but pretty upmarket and there are some lovely bars and restaurants.  Very clever the way they have kept some of the original features of the old power station, and there is a life up inside one of the chimneys if you want another activity.

Had some more family and friends over, did some work in the garden, and before you know it I’m back at my desk wondering whats been going on for the past few days.  Well, Trump has been at it again.  This time he was attacking Feds Powell, referring to him as ‘Mr Too Late’ and calling him a major loser and explaining how inflation is already on the way down, rates should be lower and that the US economy could slow unless Fed cuts rates.  Trump is clearly setting the foundations for being able to place the blame for any US economic downturn squarely at the door of the Fed rather than from the turmoil left by his Liberation Day tariff plans.

We know Trump doesn’t like Powell, we know Trump wants lower rates and we know Trump thinks he knows more about the economy and monetary policy than the Fed does.  No surprises there.  But the markets took a dim view of the attack, the potential loss of independence of the Federal Reserve Bank after news broke that Trump was looking for a way to oust Powell, and weakness in the US economy is worrying investors.  With confidence low, US markets dropped heavily yesterday, ending the day around 2.5% lower, while the US dollar also traded sharply lower.

GBPUSD hit a high of around 1.3425, within a  whisker of levels seen Sept last year, we’d look back to Fed 2022 for higher GBPUSD levels.  EURUSD saw a high of 1.1570, the highest since Nov 2021.  Both pairs off those highs now, at 1.3385 and 1.1495 respectively, which puts GBPEUR around 1.1645.  USDJPY quite a mover, the pair broke below 140.00 briefly this morning, now back to 140.45, which leaves GBPJPY at 188.00. 

Gold continues to march higher, reaching a heady $3,500.  Oh those sales by Gordon Brown in the late 1990’s/early 2000’s look pretty criminal now.  I know hindsight is a wonderful thing, but I remember there being widespread unhappiness with not only the sale itself but the manner in which he did it, pretty much telling the market in advance of his plans, thereby sending prices lower still.  Price achieved for the 395 tonnes (around 12.5 million ounces) was just below the $300 mark. 

In other news, Putin has reportedly said he is open to peace talks with Ukraine, the first time I can remember him saying this.  I do fear that his approach will be ‘agree peace or we will send in those vast forces we are amassing for another full scale invasion’.   But hopefully the talks, should they take place produce some positive results.

Over Easter the Pope passed away, which could be seen as fitting for someone in such a high religious position.  It does make the Catholic Church’s 2025 Jubilee a little more complicated, as the process of both arranging his funeral and of course then finding the next Pope needs to take place.

Plenty of sport over the weekend, Liverpool have pretty much ensured their premier league title with a win over Leicester, while Spurs have pretty much ensured they’ll finish just above the relegation zone with a loss to Notts Forest.  It is getting interesting at the top of the table, with just three points separating five teams all looking for a Champions League spot, although with Spurs and Man Utd still in with a shout of the Europa League and Chelsea hopeful of raising the Europa Conference, there are many possible permutations of which teams will actually enter which tournaments. 

Of course, I have to congratulate both Leeds Utd and Burnley for assuring their promotion to the premier league next season, not the only question is which team wins the title.  Leeds are currently top on goal difference with just two matches left to play.  Sheffield Utd, who at one stage looked odds on favourites to go up, will have to settle for a play-off position, there are quite a few teams who could still take the last playoff place. 

The economic calendar today is mostly made up with Fed officials speaking, I wonder if any of them will be brave enough to speak about Trump’s latest outburst.  Tomorrow sees key PMI’s from UK, EU and US, while UK retail sales are out early Friday morning.  Meanwhile, will Trump be able to refrain from making any other market-busting comments?  I wouldn’t bet on it…

Have a great day…

-  14.30 Feds Harker speaks

-  15.00 EU consumer confidence

-  15.00 Feds Jefferson speaks

-  18.40 Feds Kashkari speaks

-  19.00 ECBs de Guindos speaks

-  23.00 Feds Kugler speaks

-  00.00 AUS manufacturing, services PMI