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Analysts at  ANZ Bank New Zealand Limited explained that after a positive Asian and European session, equities fell sharply after reports that Trump had given the green light to apply the USD200bn in tariffs.  

Key Quotes:

“However, they ground back most losses through the NY afternoon. Energy and financial gains offset real estate and telco declines. Treasury yields rose 2-3bps across the curve, taking the firm US activity data in stride. This may reflect that pricing components have been weaker: CPI, PPI, import prices and consumer expectations have all disappointed recently. WTI oil was volatile  Friday  night but closed up 0.6%, while gold fell 0.6%, back below USD1200/oz. The USD rallied against all in the G10, with SEK and DKK leading declines.”

“Reports over the weekend suggested that China’s authorities may turn down the offer of trade talks with the US, doubting that President Trump, at least, has any real intention of scaling back the tariff war, given reports that USD200bn of new tariffs will be announced this week. A new front opened up in the  data flow  on Friday  – consumers.”

“The University of Michigan confidence survey reported that “the largest problem cited on the economic horizon involved the anticipated negative impact from tariffs. Concerns about the negative impact of tariffs on the domestic economy were spontaneously mentioned by nearly one-third of all consumers in the past three months, up from one-in-five in the prior four months.”  

“While US inflation indicators in the past week have surprised on the downside, the rumoured wide-ranging 10% tariffs will give US consumer inflation quite the boost, as they would cover half of all imports from China. The odds of the Fed having to respond in time will be a key question for markets going forward.”

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