Equities up, USD down, for the time being at least

Good morning

What a fantastic weekend spent with the family celebrating my eldest’s 2st birthday. We enjoyed cocktails and steaks on Saturday and drinks with friends and family in one of our local pubs yesterday, which obviously went on considerably later than planned and it is fair to say I have felt better on a Monday morning.  As a result of the celebrations I missed pretty much all of the sporting action over the weekend. 

Congratulations first to McIlroy for eventually winning Masters and in doing so claiming the grand slam of majors.  Congratulations as well to McLaren’s Piastri for winning the Bahrain F1 GP and also to Liverpool for extending their lead in the premier league table to 13 points with just 18 points available, my simple maths calculates therefore that they need just one more win to claim the title. 

Let’s not talk about Spurs who, having lost to Wolves have taken just four points from the last 18 available as could well be looking at finishing in 17th place, just above the relegation zone.  Ange’s days must surely be numbered, perhaps even if Spurs do somehow win the Europa League.  Still, one of the RAM founders will be happy, with Mark’s Leeds still on top of the championship and in the automatic promotions places.  Sheffield Utd who at one point looked like they were running away with it have now lost three matches in a row to put their chances of automatic promotion in some jeopardy.

Anyway, enough of the weekend, lets look at the markets.  Friday saw EU and US equities end in positive territory, Asian markets were pretty much the same overnight.  Futures markets point to higher opens this morning.  The US dollar was generally weaker and we’ve seen a continuation of that since the open, GBPUSD now 1.3155 and EURUSD almost at 1.1400.  USDJPY has traded as low as 142.25, now 142.60.  US 10 year yield remain in the 4.5% area, helped in some small part by word from Japan that they won’t use Treasury holding as a bargaining chip in trade talks. 

Last weeks highs and lows led by Trumps on-off tariffs was something of a mess and I’d love to know what the White House really think about the mayhem they caused.  I speak in the past tense but of course we all know this is nowhere near the end of this and it is nigh on impossible to work out exactly how it will finish.  Which countries will get a decent trade deal ? 

How bad will the US/China  trade war get before something gives way.  Overnight we saw the latest China trade balance, which showed a massive overall surplus of $102.64bn, far greater than expectations.  That’s a lot of money to buy gold with, which happens to have retested the highs around $3,245 overnight.  That’s not all with the US of course but Trump will be looking with some jealousy at that surplus and would do anything to get the US that sort of trade balance.

 Big news over the weekend was the Uk government taking control of British Steel.  Some quite damning reports coming of possible deliberate action by its former Chinese owners to let the plant collapse, forcing the UK to be reliant on China steel imports.   Having become a steel furnace expert over the weekend, I discover that they must be kept running with supplies of coal and iron ore as they are damaged and very expensive to restart once they cool. It seems that the Chinese owners not only failed to purchase the materials needed to power the furnaces, I read one report suggesting they had been selling their remaining supplies of coal. 

Some have gone so far as to call this sabotage, and should serve as a warning of the risks attached to getting investment in major infrastructure from overseas powers.  I remember that China were going to be building the UK’s newest nuclear power stations, I wasn’t over the moon at that idea, nor was I keen to find out France owns most of our electricity power stations.  There are some things we just shouldn’t have to rely on any other country to provide.  The steel industry is an issue as it does seem to be perpetually loss-making but every other G7 nation seems to have its own steel manufacturer.  I presume they are also loss-making, I can’t believe it is only ours.  Cheap China imports won’t help.  Perhaps we should look at bigger tariffs…..

Not much on the calendar today, we’ll have UK unemployment first thing tomorrow morning and inflation Wednesday morning, US retail sales and BoC rate announcement Wednesday and ECB rate announcement Thursday.  It’s a short week this week and the next with Easter holidays Friday and Monday.  Typically, the weather looks like it’ll be a bit more mixed that we’ve had recently but I guess we should be used to that.

Have a great day…

-  18.00 Feds Waller speaks

-  21.00 Feds Harker speaks

-  00.01 UK BRC retail sales

-  00.40 Feds Bostic speaks

-  02.30 RBA minutes

-  07.00 UK unemployment

All aboard the rollercoaster...

Good morning

More rollercoaster moves as markets still struggle to digest Trump’s tariff decisions. 

European equities had a decent day, closing up around the 5% region, although off the day’s highs.  US markets were not quite so healthy, down around 4% by the London close as Trump announced a 145% tariff on China, up 20% from yesterday’s 125%.  The trade war is not going away.  US equities did finish in negative territory although were a little off the lows.  Asian equities were mixed overnight, Japan’s Nikkei was down 3% but China stocks made it into positive territory.  Futures pricing is indicating a positive start to the European trading day.

US inflation numbers yesterday were softer than expected, headline coming in at 2.4% from 2.5% expected and core slipped to 2.8% against an expected 3%.  USD weakened across the board as thoughts turned once again to possible Fed rate cuts.  Still, the US 10 year yield ticked up towards the 4.5% area overnight, now 4.43%, still there is a suggestions that China are unloading their holdings.

EUR climbed yesterday and again overnight on confirmation they would not be putting retaliatory tariffs in place while Trump’s 90 day pause is in place.  EURUSD touched almost  1.1380 at one point, surpassing the highs seen last September and hitting the highest level since Feb 2022.  GBP also lost ground to the single currency, GBPEUR trading down to 17 month lows around 1.1460 overnight, since recovered a little to 1.1515.  Quite a rollercoaster ride.  GBPUSD ended London around 1.2935 and overnight made further gains against USD seeing a high of 1.3050, this morning’s much better than expected UK GDP release has had little overall impact. 

The weaker USD has seen further USDJPY downside, hitting a low overnight around 142.90, now 143.25.  GBPJPY is just below 187.00, in other crosses it is 2.10, 2.2560 and 25.20 vs AUD, NZD and ZAR.

New records highs have been seen in gold, which moved as high as $3,220.  I wonder whether there is a link between higher gold prices and China selling US treasuries.  Coincidence?  Perhaps.  UBS are looking for further gains in gold this year, targeting at least $3,500. 

Spurs managed to not lose last night, a pretty decent feat at the moment, but they were actually unlucky not to come away with a win, the Frankfurt keeper made several absurdly good saves to keep the scores level.  Man Utd drew 2-2 with Lyon, leaving the English clubs with everything to play for in the second leg.  Chelsea meanwhile strolled to a 3-0 win in their Europa Conference League quarter final, they remain odds-on favourites for the tournament.

A terrific weekend of sport lies ahead.  Liverpool, boosted by the somewhat surprise news that Salah has signed a contract extension, will be hoping to extend their lead In the Premier League table vs West Ham. Spurs will be looking for a second league win in a row against Wolves, though I cannot say I’m confident given Wolves are on a run of good form at the moment. 

In golf, Justin Rose leads the Masters after a first round seven under par.  It would be great to see him win but its far too early to be excited with three rounds still to play.   Veteran Bernhard Langer finished two over par, not bad for a 67 year old.

And we also have the Bahrain F1 GP this weekend, first practice begins today just after midday and the race is 4pm on Sunday.  Despite more nice weather forecast, it would be an ideal weekend to curl up on the sofa and watch sport pretty much day on both Saturday and Sunday.  However I’ll be out and about for a couple of days of 21st birthday celebrations.

Quite a busy week next week data-wise.  The latest China trade data is due in the early hours of Monday morning, a surplus of around $17bn is expected which would put Q1 at around $70bn.  That won’t go unnoticed by Trump.  From the UK we have unemployment numbers Tuesday and inflation Wednesday, while US retail sales and the latest BoC rate decision are also both due Wednesday. 

Wednesday night sees NZ inflation, followed early Thursday morning with Aussie employment numbers.  Then Thursday also brings the latest ECB rate decision where it is thought we’ll see a 25bps cut.  That’s already pretty much priced in, making the Euro’s current strength all the more impressive.  Friday and Monday are Easter bank holidays, if we are allowed to call them that these days. 

Well, its still only Friday morning but I’m pretty much done with the week already.  I’m sure there are many others that feel the same.  Still with 20% of the week still to run I guess I’d better stick around to see what madness ensues today. 

Have a great day, and a great weekend as and when it comes…

-  10.45 ECBs Lagarde speaks

-  13.30 US PPI

-  15.00 Feds Musalem speaks

-  15.00 US Michigan sentiment survey

-  16.00 Feds Williams speaks

Trump's tariff reversals leads equity markets to record gains

Good morning

Another day, another load of turmoil in the markets.  European equities were down again yesterday roughly reaching the -3% area, US markets were faring slightly better with Dow Jones and Nasdaq actually making small gains.   Then Trump hit us with a 90 day suspension of tariffs over 10% which sent stocks soaring, Dow Jones finished up nearly 8%, S&P 500 almost 10% and Nasdaq closed over 12% higher.  Futures are pointing to large gains in European markets this morning.

Asian equities followed suit overnight, Nikkei was up 9% although Hang Seng could only muster a 3% rise and China’s CSI 300 was up just 1.4%.  The lacklustre performance followed Trump’s decision to increase China tariffs to 125%, after China raised its own tariffs on US goods to 84%.  Trump says he is open to talks with China but neither side look like they are going to back down.  Trump is trying to encourage firms to manufacture in America but there is no way I see that they could replicate the vast factories with millions of workers that China has perfected. 

Currency markets are rightly unsettled.  After GBPUSD hit a high of 1.2860 yesterday morning it had dropped to mid-1.27’s through the day, only to revert back to 1.2865 or so after Trump.  Different fortunes for EURUSD, it hit highs yesterday just short of 1.1100 but actually fell on Trumps announcement, now 1.0970.  GBPEUR which had tested as low as 1.1550 yesterday is now just above 1.1700.   USDCNY traded up to almost 7.3500, its weakest level since 2007, with some talk China were selling decent clips of their vast US bond holdings.

USDJPY slipped to 144.00 yesterday afternoon, now trading up at 147.00.  CHF also weakened, USDCHF moving up to 0.8580 from a low yesterday around 0.8360.  AUD and NZD also pushed higher, GBPAUD down to 2.0760 and GBPNZD to 2.2575, still fairly elevated levels for those pairs but well off the recent highs. 

While the latest Trump announcement is helping general risk sentiment, these ‘on or off’ tariff decisions are helpful to no one.  They also raise questions of whether the tariff introductions were successful or not.  The White House says over 75 countries have come forward to negotiate on trade which should be good, but I cannot help thinking that the reversal was more down to the collapsing financial markets and rising US bond yields.  I don’t think that was the outcome Trump and his gang anticipated. 

Likewise, I’m not sure Musk foresaw his Tesla stock price falling from its Dec highs around $480 to the $220 area since he got involved with politics.  Those shares are off their lows now after a 20%+ rally yesterday but still only as high as $272, well off the $480 mark.  Musk may be a genius but he is not a politician, as evidenced by his response to Tump’s trade guru Peter Navarro when he made some disparaging remarks about Tesla.  Musk responded by saying Navarro was a ‘moron’ and ‘dumber than a sack of bricks’. 

Anyway, Trump’s ninety day suspension on these tariffs takes us to the beginning of July, which hopefully gives time for all these new trade deals to be agreed.  Otherwise, the summer holidays are likely to be somewhat ruined. 

Somewhat overshadowed by the recent tariff debacle, let us not forget that Ukraine is still very much under attack by Russia.  No sign of a peace deal yet, no sign either of a US/Ukraine minerals deal, although I’d imagine work is going on behind the scenes in this regard.  Meanwhile, Ukraine are reported to be trying to break through lines into Russia again after their Kursk offensive.  I also note that Chinese troops have been reported to have been seen in action against Ukraine, a development that no one really wants to see.  Peace is a long way off.

In football, Villa lost to a very strong, fast and organised PSG team yesterday, while Barcelona showed why they are tournament favourites with a 4-0 win over Borussia Dortmund. 

Still, enough of the Champions League.  The big match is this evening as Spurs take on Eintracht Frankfurt in the quarter finals of the Europa League.  This is Spurs only hope of getting anything this season other than a league finish below mid-table.  Fingers crossed.  Man Utd also in action, away to Olympique Lyonnais.  Ah and Chelsea, odds on favourites for the Europa Conference title, travel to Leiga Warszawa in their quarter final. 

In golf, the US Masters begins today at Augusta, the first players tee off at 12:40 UK time.   I always look at golfing odds and then decide there is no way I can pick a winner out of such a large field.  You can bet each way (top ten places), or on a player finishing in the top six, which could be a better if overall less profitable method.

I’ll be interested to hear what RBA’s Bullock has to say this morning.  This afternoon brings US CPI inflation which under normal circumstances would be pretty key but at the moment may take a back seat unless it is far away from expectations. Several Fed officials speaking this afternoon, we’ll perhaps see what their take is on the recent tariff reversals.  UK GDP is out early tomorrow morning.

It is eldest son’s 21st birthday today so I’ll possibly be knocking off early if he’s back from work to celebrate.  Incredible how time flies and how humans grow. He was born eight weeks early, weighing just over 4lb, but now towers over me at 6’3” in his socks.  I like to think he still looks up to me though.  

Have a great day…

-  11.00 RBAs Bullock speaks

-  13.30 US CPI, initial jobless claims

-  14.00 BoEs Breeden speaks

-  14.30 Feds Logan speaks

-  15.00 Feds Bowman speaks

-  17.00 Feds Goolsbee speaks

-  17.30 Feds Harker speaks

-  19.00 US monthly budget statement

-  23.30 NZ business PMI

-  07.00 UK GDP, industrial production