Bloomberg
“Stocks Climb as Trade Panic Fades; Crude Advances.”
Stocks gained from the U.S. to Asia as the panic surrounding a potential trade war showed signs of easing. Treasury yields were steady, while the dollar edged lower and oil rallied.
The S&P 500 Index and Stoxx Europe 600 both broke three-day losing streaks. Canada’s benchmark equity gauge climbed to a record and emerging-market stocks, which have been hit hard by the trade concern, broke a five-day losing streak. Oil jumped ahead of an OPEC gathering, joining a rally in commodities. The pound erased a drop to edge higher before a key Brexit vote.
A sense of calm is returning to markets after President Donald Trump stepped up trade threats against China earlier in the week, proposing moves that economists reckon could cut as much as half a percentage point from the Asian nation’s growth. Traders may well be siding with Goldman Sachs Chief Executive Officer Lloyd Blankfein, who characterized the escalation in rhetoric as simply a negotiating strategy.
Elsewhere, the Bloomberg Commodity Index rose the most in three weeks. The onshore yuan climbed after the People’s Bank of China set its daily reference rate at a stronger-than-expected level.
Reuters
“Pope criticizes Trump administration policy on migrant family separation.”
Pope Francis has criticized the Trump administration’s policy of separating migrant families at the Mexican border, saying populism is not the answer to the world’s immigration problems.
Speaking to Reuters, the Pope said he supported recent statements by U.S. Catholic bishops who called the separation of children from their parents “contrary to our Catholic values” and “immoral”. “It’s not easy, but populism is not the solution,” Francis said on Sunday night.
In a rare, wide-ranging interview, the pope said he was optimistic about talks that may lead to a historic agreement over the appointment of bishops in China and said he may accept more bishops’ resignations over a sexual abuse scandal in Chile.
Reflecting at his Vatican residence on his five years as pope, he defended his leadership of the Roman Catholic Church against criticism by conservatives inside and outside the Church who say his interpretation of its teachings is too liberal.
One of his most pointed messages concerned President Donald Trump’s zero-tolerance immigration policy, in which U.S. authorities plan to criminally prosecute all immigrants caught crossing the Mexican border illegally, holding adults in jail while their children are sent to government shelters.
The policy has caused an outcry in the United States and has been condemned abroad as videos emerged of youngsters held in concrete-floored enclosures and an audio of wailing children went viral. U.S. Catholic bishops have joined other religious leaders in the United States in condemning the policy.
The U.S. crackdown chimes with a new political mood sweeping western Europe over the large numbers of migrants and asylum-seekers, most of them escaping conflict and poverty in the Middle East and Africa. The pope said populists were “creating psychosis” on the issue of immigration, even as aging societies like Europe faced “a great demographic winter” and needed more immigrants. Without immigration, he added, Europe “will become empty.”
BBC News
“EU to launch counter-tariffs against US on Friday.”
The European Union will launch a raft of retaliatory tariffs against US exports on Friday, a top official has said. The move comes after US President Donald Trump imposed steep duties on steel and aluminium earlier this month.
American exports such as blue jeans, motorbikes and bourbon whiskey will be targeted, trade commissioner Cecilia Malmstrom confirmed. However, she said the bloc «did not want to be in this position. The unilateral and unjustified decision of the US to impose steel and aluminium tariffs on the EU means that we are left with no other choice,» she said.
Brussels drew up the list of products in March when Mr Trump initially proposed the 25% tariffs on steel imports and 10% on aluminium, which also target Canada, Mexico and other close US allies. Cranberries, orange juice, sweetcorn and peanut butter are among the other goods targeted. It comes amid an intensifying row over trade between the US and its partners.
On Tuesday, Mr Trump threatened to impose duties on an additional $200bn (£151bn) of Chinese goods after hitting $50bn of products with tariffs. He said the 10% duties would come into effect if China «refuses to change its practices». However, China accused the US of «blackmail» and said it would «fight back firmly», raising fears of a full-blown trade war.
Bloomberg
“Investors Agree With Trump: The U.S. Will ‘Win’ Any Trade War.”
Trade wars are good and easy to win — even if the victory is only Pyrrhic.
That’s the early view from financial markets as the tariff dust-up between China and the U.S. shows increasing signs of impacting stock prices. While broad measures of American equities have held up better than their Chinese counterparts, striation within the U.S. market shows investors anticipate steep losses in some stalwart names.
“If we compare the price action between Chinese equities and U.S. equities (particularly the Russell 2000), it’s pretty clear that the market is discounting the U.S. as a relative winner in the outcome,” writes Jeffrey deGraff, Renaissance Macro Research’s co-founder. “That’s not to say trade wars are bullish, but the S&P 500 has absorbed the threat and even body blows substantially better than China.”
Late Monday, U.S. President Donald Trump ordered the preparation of tariffs on an additional $200 billion in Chinese imports. Beijing vowed to retaliate if the U.S. moves ahead; Trump said that would be met with another round of tariffs on $200 billion in goods.
Analysts estimate the full impact of all measures threatened by Trump could shave up to half a percentage point off China’s economic growth. Broadening the list of inbound products from China subject to higher taxes would also ultimately raise prices for U.S. consumer goods.
The rhetoric weighed on Chinese stocks Tuesday, with the Shanghai Composite Index plunging to a two-year low and the yuan coming under pressure. American equities showed more resilience. While S&P 500 Index futures slid 1.5 percent overnight, the cash measure closed lower by just one-third of that.
DeGraff drew attention to the weakness in Chinese technology shares, which hit fresh lows relative to their American counterparts in another signal that investors anticipate any additional border thickening between the world’s two largest economies will mean more pain for China.