Markets enjoy another day of improved risk sentiment, hoping for more of the same today

Good morning

Half way through April already and the markets continue to trade with a degree of optimism that I find mildly odd given the potential for upheaval in global trade, with or without large tariffs.  I can’t see us going back to how things were a few months ago, that’s for sure.  Quite how this all pans out remains to be seen, will Trump take a slightly kinder view on his ‘allies’ or will he continue to alienate them and perhaps even push them into relationships with some who would not normally be seen as allies?  Plenty of talk of exemptions and exceptions to tariff rules but there is too much uncertainty to know what will actually come into place. 

Together with higher stock prices in both EU and US, the US dollar saw more general weakness although that US 10 year yield remains stubbornly high around the 4.5% area.  GBP has performed well, perhaps helped by US TrsSec Bessent who seemed to single out UK, Australia and South Korea as top targets for trade deals.  I can’t help thinking Trump is trying to drive a wedge between UK and EU.  GBPUSD traded up to 1.3220 this morning, UK employment numbers didn’t really provide any major market impact, if anything they were slightly better than had been expected, as were the BRC sales numbers overnight.  GBP has held up well against EUR, GBPEUR climbing to 1.1640, some 120 points up from yesterday morning lows.  No surprise that AUD is also up.

EURUSD is 1.1345, not collapsing but unable to move higher despite USD weakness, most likely down to Trump’s continued reference to EU as a trading bloc set up to attack US.  I think he must mean ‘compete with’ rather than ‘attack’.  EU’s trade guru Sefcovic is in Washington to discuss trade in the 90-day window.  The problem is, and I say this as absolutely nothing of a trade expert, the US will want EU to take their cars and their chickens, both of which are generally below the standards expected from the EU. 

Mind you, I’ve not been to Europe for a few months but if London is anything to go by, the UK and perhaps EU have not been slow in buying Teslas.  The roads are full of them, far more so than any other electric vehicle.  I know there is increasing competition from China but in my mind Tesla still rules the roost.  So Trump can hardly say we’ve not been buying US cars.  We just don’t want the massive pick-up trucks that are far more suited to their roads.

Elsewhere, RBA minutes show a degree of caution on rate cuts.  That meeting came just before Trump’s ‘Liberation Day’ tariff announcements so RBA officials were rightly reluctant to look too far into the crystal ball. RBA will be patient.  BoJ could be patient as well, there had been talk of rate rises in their may meeting but there seems to be suggestions that they’d rather stay in wait and see mode, particularly with Yen well off its recent lows. 

In other news, I read somewhere that Hamas are talking of handing over a large number, if not all hostages on condition that Israel withdraw from Gaza.  Whether that is enough for Israel to end their Gaza attacks remains to be seen, but I doubt Israel will agree to anything that prevents them from attacking Hamas infrastructure.

The UK steel plant in Scunthorpe continues to remain under threat as the race to get materials to keep the furnaces firing at high enough temperatures goes on.  If the furnaces are not kept going, the melted iron ore at the bottom of the furnace solidifies into an immovable lump, blocking the furnace and making it pretty much irreparable. 

In Ukraine, Zelensky pleaded with Trump to come to visit Ukraine to see for himself the destruction caused by the Russian invasion.  Trump responded by seeming to blame Ukraine for the invasion, or at least holding the jointly responsible.  Slightly odd given they were invaded but we have come to expect that from Trump.  Meanwhile the US/Ukraine mineral deal is still being negotiated.  Talk is that large Russian forces are building, lining up another potential large-scale invasion.

That’s about all for the time being, I’m out and about for much of the day so need to get going. 

Not the fullest economic calendar today, nothing that will really overshadow the ongoing trade battles/wars/talks.  UK inflation out early tomorrow morning, market looking for something around similar levels to last month, if anything erring on the lower side.  However it would need to did come in significantly lower I’m not sure it will be enough to turn this current strong GBP trend.

Have a great day…

-  10.00 German ZEW

-  13.30 US NY empire state manufacturing index

-  13.30 CAD CPI

-  17.00 ECBs’ Lagarde speaks

-  00.10 Feds Cook speaks

-  03.00 China GDP, industrial production, retail sales

-  07.00 UK CPI, PPI, RPI

Equities up, USD down, for the time being at least

Good morning

What a fantastic weekend spent with the family celebrating my eldest’s 2st birthday. We enjoyed cocktails and steaks on Saturday and drinks with friends and family in one of our local pubs yesterday, which obviously went on considerably later than planned and it is fair to say I have felt better on a Monday morning.  As a result of the celebrations I missed pretty much all of the sporting action over the weekend. 

Congratulations first to McIlroy for eventually winning Masters and in doing so claiming the grand slam of majors.  Congratulations as well to McLaren’s Piastri for winning the Bahrain F1 GP and also to Liverpool for extending their lead in the premier league table to 13 points with just 18 points available, my simple maths calculates therefore that they need just one more win to claim the title. 

Let’s not talk about Spurs who, having lost to Wolves have taken just four points from the last 18 available as could well be looking at finishing in 17th place, just above the relegation zone.  Ange’s days must surely be numbered, perhaps even if Spurs do somehow win the Europa League.  Still, one of the RAM founders will be happy, with Mark’s Leeds still on top of the championship and in the automatic promotions places.  Sheffield Utd who at one point looked like they were running away with it have now lost three matches in a row to put their chances of automatic promotion in some jeopardy.

Anyway, enough of the weekend, lets look at the markets.  Friday saw EU and US equities end in positive territory, Asian markets were pretty much the same overnight.  Futures markets point to higher opens this morning.  The US dollar was generally weaker and we’ve seen a continuation of that since the open, GBPUSD now 1.3155 and EURUSD almost at 1.1400.  USDJPY has traded as low as 142.25, now 142.60.  US 10 year yield remain in the 4.5% area, helped in some small part by word from Japan that they won’t use Treasury holding as a bargaining chip in trade talks. 

Last weeks highs and lows led by Trumps on-off tariffs was something of a mess and I’d love to know what the White House really think about the mayhem they caused.  I speak in the past tense but of course we all know this is nowhere near the end of this and it is nigh on impossible to work out exactly how it will finish.  Which countries will get a decent trade deal ? 

How bad will the US/China  trade war get before something gives way.  Overnight we saw the latest China trade balance, which showed a massive overall surplus of $102.64bn, far greater than expectations.  That’s a lot of money to buy gold with, which happens to have retested the highs around $3,245 overnight.  That’s not all with the US of course but Trump will be looking with some jealousy at that surplus and would do anything to get the US that sort of trade balance.

 Big news over the weekend was the Uk government taking control of British Steel.  Some quite damning reports coming of possible deliberate action by its former Chinese owners to let the plant collapse, forcing the UK to be reliant on China steel imports.   Having become a steel furnace expert over the weekend, I discover that they must be kept running with supplies of coal and iron ore as they are damaged and very expensive to restart once they cool. It seems that the Chinese owners not only failed to purchase the materials needed to power the furnaces, I read one report suggesting they had been selling their remaining supplies of coal. 

Some have gone so far as to call this sabotage, and should serve as a warning of the risks attached to getting investment in major infrastructure from overseas powers.  I remember that China were going to be building the UK’s newest nuclear power stations, I wasn’t over the moon at that idea, nor was I keen to find out France owns most of our electricity power stations.  There are some things we just shouldn’t have to rely on any other country to provide.  The steel industry is an issue as it does seem to be perpetually loss-making but every other G7 nation seems to have its own steel manufacturer.  I presume they are also loss-making, I can’t believe it is only ours.  Cheap China imports won’t help.  Perhaps we should look at bigger tariffs…..

Not much on the calendar today, we’ll have UK unemployment first thing tomorrow morning and inflation Wednesday morning, US retail sales and BoC rate announcement Wednesday and ECB rate announcement Thursday.  It’s a short week this week and the next with Easter holidays Friday and Monday.  Typically, the weather looks like it’ll be a bit more mixed that we’ve had recently but I guess we should be used to that.

Have a great day…

-  18.00 Feds Waller speaks

-  21.00 Feds Harker speaks

-  00.01 UK BRC retail sales

-  00.40 Feds Bostic speaks

-  02.30 RBA minutes

-  07.00 UK unemployment

All aboard the rollercoaster...

Good morning

More rollercoaster moves as markets still struggle to digest Trump’s tariff decisions. 

European equities had a decent day, closing up around the 5% region, although off the day’s highs.  US markets were not quite so healthy, down around 4% by the London close as Trump announced a 145% tariff on China, up 20% from yesterday’s 125%.  The trade war is not going away.  US equities did finish in negative territory although were a little off the lows.  Asian equities were mixed overnight, Japan’s Nikkei was down 3% but China stocks made it into positive territory.  Futures pricing is indicating a positive start to the European trading day.

US inflation numbers yesterday were softer than expected, headline coming in at 2.4% from 2.5% expected and core slipped to 2.8% against an expected 3%.  USD weakened across the board as thoughts turned once again to possible Fed rate cuts.  Still, the US 10 year yield ticked up towards the 4.5% area overnight, now 4.43%, still there is a suggestions that China are unloading their holdings.

EUR climbed yesterday and again overnight on confirmation they would not be putting retaliatory tariffs in place while Trump’s 90 day pause is in place.  EURUSD touched almost  1.1380 at one point, surpassing the highs seen last September and hitting the highest level since Feb 2022.  GBP also lost ground to the single currency, GBPEUR trading down to 17 month lows around 1.1460 overnight, since recovered a little to 1.1515.  Quite a rollercoaster ride.  GBPUSD ended London around 1.2935 and overnight made further gains against USD seeing a high of 1.3050, this morning’s much better than expected UK GDP release has had little overall impact. 

The weaker USD has seen further USDJPY downside, hitting a low overnight around 142.90, now 143.25.  GBPJPY is just below 187.00, in other crosses it is 2.10, 2.2560 and 25.20 vs AUD, NZD and ZAR.

New records highs have been seen in gold, which moved as high as $3,220.  I wonder whether there is a link between higher gold prices and China selling US treasuries.  Coincidence?  Perhaps.  UBS are looking for further gains in gold this year, targeting at least $3,500. 

Spurs managed to not lose last night, a pretty decent feat at the moment, but they were actually unlucky not to come away with a win, the Frankfurt keeper made several absurdly good saves to keep the scores level.  Man Utd drew 2-2 with Lyon, leaving the English clubs with everything to play for in the second leg.  Chelsea meanwhile strolled to a 3-0 win in their Europa Conference League quarter final, they remain odds-on favourites for the tournament.

A terrific weekend of sport lies ahead.  Liverpool, boosted by the somewhat surprise news that Salah has signed a contract extension, will be hoping to extend their lead In the Premier League table vs West Ham. Spurs will be looking for a second league win in a row against Wolves, though I cannot say I’m confident given Wolves are on a run of good form at the moment. 

In golf, Justin Rose leads the Masters after a first round seven under par.  It would be great to see him win but its far too early to be excited with three rounds still to play.   Veteran Bernhard Langer finished two over par, not bad for a 67 year old.

And we also have the Bahrain F1 GP this weekend, first practice begins today just after midday and the race is 4pm on Sunday.  Despite more nice weather forecast, it would be an ideal weekend to curl up on the sofa and watch sport pretty much day on both Saturday and Sunday.  However I’ll be out and about for a couple of days of 21st birthday celebrations.

Quite a busy week next week data-wise.  The latest China trade data is due in the early hours of Monday morning, a surplus of around $17bn is expected which would put Q1 at around $70bn.  That won’t go unnoticed by Trump.  From the UK we have unemployment numbers Tuesday and inflation Wednesday, while US retail sales and the latest BoC rate decision are also both due Wednesday. 

Wednesday night sees NZ inflation, followed early Thursday morning with Aussie employment numbers.  Then Thursday also brings the latest ECB rate decision where it is thought we’ll see a 25bps cut.  That’s already pretty much priced in, making the Euro’s current strength all the more impressive.  Friday and Monday are Easter bank holidays, if we are allowed to call them that these days. 

Well, its still only Friday morning but I’m pretty much done with the week already.  I’m sure there are many others that feel the same.  Still with 20% of the week still to run I guess I’d better stick around to see what madness ensues today. 

Have a great day, and a great weekend as and when it comes…

-  10.45 ECBs Lagarde speaks

-  13.30 US PPI

-  15.00 Feds Musalem speaks

-  15.00 US Michigan sentiment survey

-  16.00 Feds Williams speaks