Trump ignites US-China trade war

Andrew Hall , PhillipCapitalUK
19/Jun/2018 08:47

Asian shares slumped to four month lows on Tuesday as the trade war between the two largest economies deepened after US President Donald Trump threatened to impose tariffs on a further $200bn worth of Chinese imports. China unfazed announced that any new tariffs imposed would be matched by “strong, powerful countermeasures” accusing the US of “blackmail”. The dollar fell -0.80% against the Yen to trade at 109.67 after Trumps comments.
“These tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced” Trump said. Adding that “if China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods. The trade relationship between the United States and China must be much more equitable”. The MSCI's broadest index of Asia-Pacific shares outside Japan dropped -1.2%, pulled down by sharp drops in Chinese shares - hitting lows not seen since February. In Japan the Nikkei lost -1.77%, whilst Hong Kong’s Hang Seng lost -2.72%. Australia’s ASX200 remained largely flat at -0.03% supported by an increase in commodity prices and a depreciating currency.


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RBA release minutes

Andrew Hall , PhillipCapitalUK
19/Jun/2018 08:43

The Reserve Bank of Australia released their minutes early this morning from their latest meeting in June where the policymakers held the cash rate at a historic low of 1.50%. The minutes stroke a similar tone of bullish growth forecasts paired with a cautious tone on inflation for both the domestic and global economy.


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Tags:   RBA Minutes AUD.

Migration rocks Merkel's coalition

Andrew Hall, PhillipCapitalUK
18/Jun/2018 09:12

The weekend was dominated by politics in Germany with Angela Merkel said to have two weeks to save her coalition following disagreements over migration policy. The German leader is at a critical moment in her political career as she battles with her long-time Bavarian ally over how best to handle the refugee crisis, with the Christian Democratic Union striving for the power to turn away refugees at borders if they are already registered as asylum seekers within other EU nations.


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Oil slumps ahead of OPEC June 22 meeting

Andrew Hall , PhillipCapitalUK
18/Jun/2018 09:05

Oil slumped on Monday ahead of the OPEC meeting on June 22 in Viena, as the rift between OPEC allies escalates with Saudi Arabia and Russia pushing to lift output curbs, whilst the threat of a global trade war further dampened market mood with China planning their own retaliative measures. WTI is down over 2.7% to trade at $63.951 per barrel, whilst Brent matched declines to trade at $63.921 in early trading.


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BoJ Inflation Warning

Nathan Sage , PhillipCapitalUK
15/Jun/2018 09:29

Click here The Bank of Japan held its latest monetary policy meeting overnight and as expected stood pat on a move in interest rates but warned of weaker consumer inflation. The BoJ has been flip flopping between reducing and continuing with its massive QE stimulus program throughout this year and the latest warning on inflation doesn’t bode well. The Governor, Haruhiko Kuroda, said in the post decision press conference that there is still momentum towards the 2% target but core inflation had slowed down somewhat due to a rising Yen. The slightly dovish view of the BoJ has caused the Yen to weaken after yesterday’s brief bid and it currently trades around ¥110.80 against the greenback.


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ECB Annnouces QE Cut

Nathan Sage, PhillipCapitalUK
15/Jun/2018 09:26

Click here News that the ECB will stop its Quantitate Easing programme in December, having first tapered it to €15Bn in September, did not cause panic and a sell-off in global bond markets. Although there was very little guidance from the ECB board members prior to the announcement, markets took it relatively well with the sole exception of the euro which sold off heavily immediately after the announcement and languished near two week lows this morning. The support for core bond markets is believed to be coming from a breakdown in confidence in emerging markets, led by Argentina, and resulting in a flight to safety.


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Tags:   ECB QE Draghi Euro

“The economy is doing well”

Andrew Hall, PhillipCapitalUK
14/Jun/2018 08:46

The Federal Reserve voted to raise interest rates by 0.25% on Wednesday citing a strengthening labour market and improved economic activity. “The main takeaway is that the economy is doing well”, Powell said. Fed policymakers forecast unemployment, currently at an 18 year low to drop to 3.6%, whilst GDP growth is projected at 2.8% a slight improvement on previous, and 2.4% for next year, whilst inflation is expected to reach 2.1% by the end of this year and remain around there through 2020. The Fed confirmed that any further rate hikes will be "consistent with sustained expansion of economic activity, strong labour market conditions, and inflation near the Committee's symmetric 2% objective”. The Fed voiced concerns regarding the ongoing trade dispute, yet advised that policy or forecasts will not change until the trade risks are realised.


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ECB to discuss future of QE stimulus

Nathan Sage, PhillipCapitalUK
14/Jun/2018 08:25

The European Central Bank will conclude their meeting today in the Latvian capital of Riga and traders are eagerly awaiting comments from President Mario Draghi. The cornerstone of the ECB stimulus program has been its massive bond buying program, which amounts to €30Bn per month, and they are running out of time to give guidance to markets as to when and how they will end this. Policymakers would be wise to give investors time to digest the news and avoid any taper tantrums, although markets are currently expecting the QE to end in December. Draghi will also release a fresh round of forecasts for the Eurozone as recent figure have been underwhelming causing question marks over the strength of the bloc’s recovery.


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Trump and Kim are best pals...apparently

Andrew Hall , PhillipCapitalUK
13/Jun/2018 09:04

Trump and Kim are best pals and the government came through the Brexit Bill votes unscathed on the face of it - the world is a better place and we can all sleep safely in our beds of a night! TheBrexit horizon still looks pretty hazy however with behind the scene "assurances" apparently made to avoid a Tory rebellion; it seems that this problem has not been put fully to bed yet and the can, while a bit further down the road at the moment, will need kicking again at some stage. The pound initially strengthened 0.3% against the dollar to $1.3424 after parliament voted to back several amendments to the EU withdrawal bill, but reversed gains to trade at $1.33635.


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Asian shares decline ahead of Fed policy decision

Andrew Hall, PhillipCapitalUK
13/Jun/2018 08:51

Asian shares declined on Wednesday as markets await the Federal Reserve policy decision later today at 19.00 BST, for any indication on future rate of tightening with the focus now shifting away from Tuesday’s North Korea summit. The central bank is expected to raise rates a quarter-point with recent data remaining solid, unemployment is at an 18 year low whilst CPI remains above the 2% mark. However the big question remaining is whether it will be three or four hikes this year, Federal Reserve Chair Jerome Powell may reveal the scope for further tightening when he takes to the stand at 19.00 BST. The MSCI's broadest index of Asia-Pacific shares outside Japan dropped -0.5%, erasing all previous day’s gains, whilst in Japan the Nikkei climbed +0.38%. Elsewhere Hong Kong’s Hang Seng lost -0.58%, whilst Australia’s ASX200 retreated -0.51%.


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Historic Trump-Kim summit

Nathan Sage , PhillipCapitalUK
12/Jun/2018 08:38

Politics are going to make the headlines today with the President Donald Trump and North Korean Leader Kim Jong-un pow wow under way and Kim promising that the world will see a "major change". The two leaders have now signed a “very important” document according to Mr Trump and when asked if the two leaders were moving towards denuclearisation he said “we are starting the process very quickly”. After the one on one meeting Mr Kim said the US and North Korea would “leave the past behind” and “The world will see a major change. I would like to express my gratitude to President Trump for making this meeting happen.” Markets have pushed forward with the risk on mood as the Yen has weakened slightly overnight now trading around 110.34 against the greenback.


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Brexit bill returns to the Commons

Nathan Sage , PhillipCapitalUK
12/Jun/2018 08:23

Back home the Brexit Bill returns to the Commons for the fifteen Lords' amendments to be voted on; this will go on until the early hours of tomorrow, although May seems to have avoided a major rebellion for now. The House of Lords, the upper house, has demanded changes on delicate issues such as the permanence in the shared economic space of the EU, exchange of goods, free movement of people so on and so forth. An unfavourable vote would further weaken May's position.


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Trump revokes support in Tweetstorm

Andrew Hall, PhillipCapitalUK
11/Jun/2018 09:15

Just when we thought a G-7 joint statement had been reached after political advisors and draftsman strived through two nights to find words that appease all parties, US President Donald Trump took to Twitter to revoke his support. In a string of angry tweets Trump vented his anger at his allies, paying particular focus on Canadian Prime Minister Justin Trudeau, who was described as "very dishonest and weak" and "acts hurt when called out". Trump stated that the EU “pay only a fraction of the cost - and laugh”, adding that the EU needed to pay "much more" to help fund the international military alliance, which includes 28 members including the UK, US, Germany, Canada and Turkey.
Is this a ploy by Trump as he goes into tomorrow’s summit with Kim to look like a no-compromising super power or a serious breakdown between the worlds’ leading economies that could lead to a damaging trade war? US President Donald Trump will meet North Korea's leader Kim Jong-un in Singapore tomorrow at 9.00 AM local time. The event, which will be held in the secluded Capella Hotel in Sentosa, an island in front of Singapore chosen as neutral ground for the first summit between the President of the United States and his Pyongyang counterpart.


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Oil retreats as Russia and US supplies build

Camilla Boldracchi, PhillipCapitalUK
11/Jun/2018 09:09

Oil prices fell on Monday, pushed by Russian and U.S. drilling activities. Despite OPEC’s efforts to slow down production, US’ refineries have increased their efforts, creeping to some of the highest level since March 2015. “Non-OPEC supply is expected to rise sharply in 2019 led by U.S. shale growth, along with Russia, Brazil, Canada and Kazakhstan” U.S. bank JPMorgan said in its quarterly outlook published on Friday. OPEC and its partners are set to meet on June 22 in Vienna, Austria, to discuss relevant policies. Brent crude is pricing at $76.06 per barrel and WTI Crude oil at $65.47 per barrel.


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Tags:   Oil Russia US OPEC Brent WTI.

Asian shares soar to two and a half month high

Andrew Hall, PhillipCapitalUK
07/Jun/2018 08:47

Asia shares soared to two and a half month highs on Thursday finding support in bullish economic fundamentals whilst US tech shares continue their recent surge. Elsewhere the euro and global bond yields found support as expectation builds for the European Central Bank to wind down its stimulus. The Euro closed up +0.18% against the dollar, holding around its two week high. The MSCI's broadest index of Asia-Pacific shares outside Japan climbed +0.6%, continuing its recent gains, whilst Japan’s Nikkei rose +0.87%. Elsewhere Hong Kong’s Hang Sang increased +0.57%. Investors focus will now look to the G7 meeting for any indication on the future state of global trade, as well as the month’s meeting of both the Federal Reserve and the ECB as fears grow on protectionism.


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Brexit comes back to the fore

Nathan Sage, PhillipCapitalUK
07/Jun/2018 08:38

The Brexit debate is coming back to the fore once more with an alleged rift emerging between May and Davis over the back-stop position on not being able to agree customs arrangements. It is said that he was furious that no end date had been added to the draft ‘backstop’ which could open the door to the UK being tied to the customs union indefinitely and he could even resign over the matter. Any departures from high level members over Brexit especially David Davis would lead to even more uncertainty leaving GBP exposed to the downside.


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Tags:   UK Brexit May Davis GBP.

Confidence vote for Italian Prime Minister Conte

Andrew Hall, PhillipCapitalUK
06/Jun/2018 09:53

Italian Prime Minister Giuseppe Conte overcome his first parliamentary stumbling block winning a confidence vote in the Senate by 171 votes in favour of the government with 117 against. Conte promised an array of populist measures from increased spending on the poor, vowing a “citizens income” to sweeping tax cuts, urging for a stronger, fairer Europe “to prevent its decline”. Despite all the promises bonds extended their declines with little indication that Conte will deviate from the populist program as he outlined his fiscal expansion plans. The common currency has recovered somewhat from its 10 month low last week, however with the rise of populism expect further political uncertainty ahead with increased euro volatility. The Euro is currently trading at 1.1744 against the dollar, having recovered somewhat from its May low of 1.1540, nevertheless remaining somewhat off Februarys highs of 1.2510. Conte will face his second confidence vote this afternoon from the lower house.


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Strong UK data supports the pound

Andrew Hall, PhillipCapitalUK
06/Jun/2018 09:37

There was strong data out of the UK through the services PMI yesterday morning and sterling felt the benefit and continues to trade higher this morning around 1.3400. The stronger data would lead most to think of high rates in the UK however analysts have pointed to the fact that this is an isolated data point and that the Bank continually refers to consistent data points. Arch-hawk Ian McCafferty speaks on LBC, a phone in talk radio show, at 4pm and he’ll likely face questions from the presenter and public regarding bank policy and the future of interest rates. The only shock here would be if he does anything other than call for higher rates.


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Asian shares mixed after yesterday's rally

Andrew Hall , PhillipCapitalUK
05/Jun/2018 09:06

Asia shares traded largely mixed on Tuesday, taking respite from yesterday’s rally with investors focus remaining cautiously optimistic on bullish economic fundamentals as the stance shifts away from trade war fears...for now at least. Strong US data fundamentals are back in focus, after an above forecast job report buoyed the market, whilst Eurozone fears eased as Italy’s anti-establishment parties formed a coalition. The MSCI's broadest index of Asia-Pacific shares outside Japan was flat after climbing +1.4% yesterday. Japanese stocks pared, with the Nikkei gaining +0.28%, whilst Hong Kong’s Hang Sang rose +0.42%. Sydney’s ASX200 did not fare so well down -0.51%.


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UK Construction PMI restores upward drift

Nathan Sage, PhillipCapitalUK
05/Jun/2018 08:35

In the UK a stronger than expected construction PMI helped to restore the upward drift, and overnight we have received news of a bounce back in the retail sector with the BRC reporting a rise of 2.8% YoY in May in like-for-like sales, helped by the excellent weather. Separately, Barclaycard reports a rise of 5.1% in spending during May. Some areas of the press are heralding this bounce as the return of the consumer but we think it is far too early to take that view and see it as a normalisation after the poor April figure. However, it is likely to give further support to yields this morning, further eroding last week’s Italian induced fall. Later this morning we get the final piece of the PMI jigsaw, services, and the forecast here is 53.0 after April’s 52.8 reading.


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