“For every investor who is worried about where this trade battle is heading, there is another who points out that this stage of the trade measures is not likely to have a large impact on corporate profits or growth in either the US or China” — Sean Callow, senior currency strategist at Westpac.
“We should take [Donald Trump’s] threat [of further tariffs] very seriously, given Mr Trump’s longstanding views on trade, his protectionist promises on the campaign trail and polling indicating his voter base remains with him into the November midterms.”
Hot topic
Global markets are bracing themselves as the deadline nears for the US to start imposing tariffs on $34bn of imports from China, in what will mark a significant milestone in the trade dispute between the world’s two largest economies.
China’s stocks are continuing to take the biggest hit, with wider Asia-Pacific equities broadly lower. European stocks are rising, with some major exporters helping Germany’s Xetra Dax 30 outperform its neighbours.
Meanwhile, the onshore exchange rate for China’s renminbi is holding above the nadir touched earlier in the week as worries ease that the trade dispute could reach the currency market. As investors remain on watch for signs that China will allow the renminbi to weaken markedly as part of its response to Washington’s protectionism, the currency is just 0.1 per cent weaker at Rmb6.6365, well away from the extremes of its daily 2 per cent trading band.
Equities
Frankfurt’s Xetra Dax 30 is up 0.9 per cent, with carmakers in prominent positions on its leaderboard. London’s FTSE 100 is 0.3 per cent higher and the Europe-wide Stoxx 600 is 0.4 per cent stronger.
The Stoxx index tracking carmakers has gained 3.5 per cent. BMW is in pole position in Frankfurt, up over 4 per cent, with Daimler close behind, up 3.7 per cent.
The CSI 300 index of major Shanghai and Shenzhen-listed stocks is down 0.7 per cent, taking its loss for the week to almost 5 per cent. The Shanghai Composite index is weaker by 0.8 per cent for the session and almost 4 per cent for the week.
Hong Kong’s Hang Seng is down 0.9 per cent.
Tokyo’s Topix is down 1 per cent as industrials dropped 1.2 per cent. Seoul’s Kospi was off 0.8 per cent.
According to futures trade, US markets will return from the Independence Day break with a 0.4 per cent rise for the S&P 500 and the Nasdaq Composite.
Forex
The dollar index is down 0.3 per cent on the day, as its wider rally of almost 2.5 per cent for 2018 leaves it looking tired. The Federal Reserve is due to publish minutes of its June meeting later in the session, at which it raised rates. The detail of the discussion will feed into market expectations on the pace of US monetary tightening.
The euro is up 0.4 per cent at $1.1703, helped by a stark improvement in German industrial orders for May. The data beat forecasts having been significantly short of expectations in April.
Sterling hit a peak of $1.3267 after Mark Carney, the governor of the Bank of England said the UK’s economic slowdown in the first quarter was more due to bad weather than the economic climate. The pound is up 0.2 per cent higher overall for the day at $1.3247.
Commodities
Oil prices are lower, with Brent crude, off 0.6 per cent at $77.81 a barrel, while US marker West Texas Intermediate is down 0.4 per cent at $73.85.
