- Very quiet day statistically with focus on US JOLTS Job Openings as tariff ping pong continues; smattering of central bank speakers, busy day for corporate earnings in US, Asia and Europe
- More lessons being dispensed on not reacting to very fluid tariff situation; upcoming Trump-Xi dialogue key to prospects for escalation; but tariff threat will be enough to trigger some supply chain disruptions and delays in business spending
EVENTS PREVIEW
As is often the case on the second working day of the month, the statistical schedule is soemthing of a ‘nothing burger’, with the only real highlight being the first of this week’s US labour market data via way of JOLTS Job Openings, with Spanish Employment and Non-oil PMIs from Egypt & Saudi Arabia to digest. Per se US trade tensions will remain front and centre, accompanied by a smattering of Fed speak, minutes from Brazil’s BCB policy meeting. Corporate earnings are plentiful, with highlights in Asia including Mitsubishi, Heavy Industries and Sumitomo Corp; in Europe: BNP Paribas, Diageo, Infineon, Intesa Sanpaolo, OMV and UBS, while the US looks to ADM, AMD, Alphabet, Marathon Petroleum, Mondelez and Pepsico.
The ‘diplomatic’ ping pong on tariffs both with Canada & Mexico, and China on other hand is yet another reminder for markets that the situation is very fluid, and reacting to every headline is the path to being constantly whipsawed. China’s repsonse to US measures is clearly being calibrated to pressure key US exports areas (agriculture, energy & machinery), while at the same time looking to mitigate risks to domestic inflation; it is all part of the ‘bargaining process’, even if it looks more like ‘Gunboat diplomacy’. The focus should now be on the upcoming Trump-Xi dialogue, which will dictate the medium-term outlook for whether these trade tensions will escalate. The one month suspension of tariffs with Canada and Mexico is to a recognition that having wrung some concessions from both countries on immigration and fentanyl controls, going down the route of immediately deploying tariffs that will harm all three economies would be self-defeating, if not reckless. That said, the threat and/or reality of these tariffs (in all cases) is likely to start creating supply chain disruptions, and delay business decisions (above all investment).
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