At the beginning of the week we saw Trump’s trade tantrum cause markets to revert to a risk off mood, with traders seeking the comforts of traditional safe haven assets like gold and silver, which were both up over 1% on Monday. Traders also sought the safety of US Treasury’s, with the 10 year note yield down nearly 2bps from Friday.
Markets this morning however have woken with a little spring in their step, with the sound of Trump’s tweets easing market concerns on the tech sector front. We saw traders somewhat cautiously moving away from safe heaven assets and back into the equities market, with the Dow closing 1.65 percent higher while the S&P 500 gained 1.26 percent. Markets however are still fearful of a trade war between the world’s two largest economies and yesterday’s list published by the US outlining Chinese imports that could face tariffs did little to ease concerns here. In the past hour we saw China retaliate with their own tariffs on goods like vehicles, chemicals and soybeans. Commodity prices are lower on the back of this announcement and I fear this won’t be the last of the repercussions.
The dollar took this higher risk appetite as an opportunity to advance against its major peers. EURUSD was down over 0.5 percent trading at lows around 1.2250 after German Retail Sales disappointed and set the downward tone for the day. EU PMI also disappointed at 56.6, marking its third consecutive month of decline, with the German figure also coming in at an 8 month low.
The euro has the opportunity to erase some of its losses with this morning’s inflation number. Economists are expecting a reading of 1.4 percent, up from February’s 1.1 percent. We have seen the cost of living fall around other major economies in recent months so it may be a tall order to see the figure bounce 0.3 percent. We also have the unemployment figure out at the same time, which is expected to drop to 8.5 percent. The fall in this number has perhaps gone under the radar a little with the unemployment figure a full one percent lower than this time last year.
In the UK we have construction data out this morning with the figure expected to come in weaker at 50.8, down from 51.4 percent. The continued softening in this figure will no doubt be a concern as the industry is dangerously close to slipping back under 50.0 which would indicate a contraction.