Bloomberg
“Stocks Battered as Protectionism Sparks Volatility: Markets Wrap.”
Fears of a trade war between the world’s two largest economies returned to haunt markets on Wednesday, mauling U.S. stocks and sending investors into haven assets from Treasuries to gold.
The S&P 500 Index tumbled through its average price for the past 200 days, with all 11 sectors lower after China said it would levy 25 percent tariffs on imports of 106 U.S. products including soybeans, automobiles, chemicals and aircraft. Boeing lost almost 5 percent and semiconductor shares fell nearly 3 percent. The Cboe Volatility Index jumped to 23.55, almost double its level for the past year.
“Markets don’t like uncertainty, and this back and forth with what the U.S. is doing with tariffs and targeting specifically Chinese products and Chinese trade relationships and policies, they’re obviously not good,” Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management, said in an interview at Bloomberg’s New York headquarters.
Markets have been buffeted in recent weeks by everything from a volatility spike and a tech selloff to fears of an all-out trade war, and developments on Wednesday suggest there may be more turbulence to come. Investors are having to weigh the growing protectionist rhetoric between the U.S. and China against the chances of measures having a meaningful effect on the still-upbeat global growth picture.
Elsewhere inflation data from Europe matched estimates, and the euro stayed higher. West Texas oil fell as commodities were roiled by the growing trade dispute, while emerging-market stocks tumbled and their currencies dropped.
Reuters
“Japan braces for Trump assault on trade, yen policy as summit looms.”
Japanese government officials are bracing for Donald Trump to get tough in trade talks, and are particularly anxious that the U.S. president could target Prime Minister Shinzo Abe’s weak-yen policies.
The deal Trump clinched with South Korea last month, which was reached in unusually quick negotiations and included a side deal to deter competitive currency devaluation, was the kind of agreement Tokyo fears most.
The officials told Reuters that they worry that similar tactics could be used against Tokyo when Trump meets Abe for a summit at Mar-a-Lago, the president’s Florida resort, later this month.
If Trump forces Bank of Japan and currency policy into discussions, Japanese policymakers don’t have an obvious way to appease him, especially given the unpredictable nature of his attacks.
The biggest risk is if Trump links trade with currency policy and accuses Japan of keeping the yen artificially weak through ultra-easy monetary policy, especially as he seeks to appeal to voters ahead of November’s mid-term U.S. congressional elections. Back in January 2017, Trump alleged that Japan used its “money supply” to weaken the yen and give exporters an unfair advantage.
Any such concerted pressure could bind Tokyo’s hands in dealing with a climb in the yen, which would hurt the nation’s export-reliant economy that has been growing but may not be resilient to such a sideswipe.
BBC News
“AI ‘poses less risk to jobs than feared’ says OECD.”
Fewer people’s jobs are likely to be destroyed by artificial intelligence and robots than has been suggested by a much-cited study, an OECD report says. An influential 2013 forecast by Oxford University said that about 47% of jobs in the US in 2010 and 35% in the UK were at «high risk» of being automated over the following 20 years. But the OECD puts the US figure at about 10% and the UK’s at 12%. Even so, it says many more workers face their tasks significantly changing.
The OECD says the previous forecasts exaggerated the impact of automation because they had relied on a broad grouping together of jobs with the same title. Its new analysis, by contrast, takes account of the differences between jobs with the same name. For example, the role of a carpenter can vary greatly depending on what type of projects a worker is involved in, how much autonomy they have, and the size of their employer. Some of those roles may be more vulnerable to automation than others.
The study did, however, flag up that young people could find it harder to find work in future as entry-level posts had a higher risk of automation than jobs requiring more experience. The research was published last month, but attracted little attention until covered by the Financial Times.
The earlier study by Oxford University’s Carl Frey and Michael Osborne formed the basis for projections by the Bank of England, as well as a popular risk-prediction tool by the BBC. It also inspired several other studies that similarly produced high double-digit estimates of the percentage of jobs facing wipe-out.
But the OECD said a variety of factors made some similarly-titled jobs less susceptible to automation than others, depending on whether:
-computers and other human labour-replacing equipment have already been adopted
-the role involves having to deal with complex social relationships, including caring for others and recognising cultural sensitivities
-the post requires lots of creativity and complex reasoning
-the job requires lots of physical manipulation of objects in a constantly changing work environment
Bloomberg
“For Bond Market, Trade-War Armageddon Looks Far From Imminent.”
The U.S. Treasury market has yet to buy fully into the fear that’s sending equities sliding — that the world is on the precipice of a trade war.
The S&P 500 is down about 8 percent from its intraday high in March amid escalating trade tensions, while the benchmark 10-year Treasury yield has dropped less than 0.20 percentage point in that period, suggesting the debt is seeing only marginal haven buying.
For strategists following the world’s biggest bond market, the relative calm shows the market expects that U.S. protectionist measures — and retaliation by China and other countries — will fail to derail global economic growth or deter the Federal Reserve from hiking rates.
“Calmer heads are prevailing in the bond market with participants there realizing that the end game is likely to be much less onerous than what are in the initial proposals,” Marty Mitchell, an independent strategist, wrote in a note Wednesday. “The bond market seems also to be taking the view that the economic impact of any future changes in tariffs from either side is going to be fairly minimal.”
Shares slumped Wednesday as China said it would levy an additional 25 percent levy on around $50 billion of U.S. imports, including soybeans, automobiles, chemicals and aircraft, in response to proposed American duties. Ten-year Treasury yields fell about 1 basis point to 2.77 percent, well within the range of the past week.
That’s not to say traders haven’t been busy. Even as the decline in yields has been contained, volume Wednesday morning is about twice the normal level, according to Jim Vogel, a strategist at FTN Financial Capital Markets.