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Home / World / Market hopes will blink before China and the US wage a trade war

Market hopes will blink before China and the US wage a trade war



China is just one of the Trem administration multifront trade battles, but it's the big one, and any development with China showing a de-escalation would be seen as positive by the markets. In response to US tariffs on steel and aluminum, Canadian tariffs on US goods will come into effect on Sunday.

On Friday, there were no reports of official talks with Beijing planned before the deadline of July 6. The White House and Congressional sources say they are operating as if US tariffs on Chinese goods and Chinese retaliatory tariffs come into effect next Friday, and warn constituents and companies to prepare for it. The first $ 34 billion was followed by tariffs on another $ 1

6 billion for Chinese goods, and there could be more after that.

US Treasury Secretary Steven Mnuchin said Friday the US is ready to listen if China wants to come to the table Free and fair trade and fair treatment of US companies.

"Surely the # 1 market driver is our perception of trade issues right now, and that was not great, at the same time we have a stronger dollar beating up the emerging markets, and we have a Fed that seems immune to trading rhetoric seem to move forward, "said Art Hogan, chief market strategist at B. Riley FBR.

In addition to trading, the monthly job report next Friday is the big event for the market, due Wednesday for the July Fourth Holiday. There will be ISM manufacturing data on Monday and monthly vehicle sales are expected on Tuesday. There is also the release Thursday of the minutes of the last meeting of the Fed.

In the bond market, yields were mostly lower on Friday, and a yield curve flattening as the Fed appears to raise interest rates two more times this year and investors fear that trade wars will hit the global economy. Traders fear that the flattening curve signals a weaker economy as one that is inverted has signaled a recession reliably. [2] The 2-year Treasury yield was the most heavily influenced by the Fed's policy, at 2.52 percent. The 10-year forecast, which reflects the longer-term outlook, fell to 2.83 percent. The difference between them was 31 basis points "flatter" or narrower, the lowest since 2007.

Investors sold $ 24.2 billion last week in US ETFs and mutual funds, almost record-breaking, and turned down monies into the Treasury Billy Holdings, now at a 10-year high.

Michael Hartnett, chief investment officer at Bank of America Merrill Lynch, said he believes the move was a response to trade concerns, but he does not think investors are panicking. Instead, they reorient themselves after a "ubiquitous euphoria" over the US earlier this year.

"This nervousness, the losses that people in non-US markets have suffered through the trade wars, have probably led to what you see." The markets in the last week or so – a great relaxation of positioning, one Escape to quality, "he said.

Hartnett said he does not expect a major market sell-off unless there's a new significant negative event A negative development could be tariffs on European cars or tariffs on US technology Recovering Problems with the Chinese Currency. "

As for the currency, traders have seen the yuan sink and lost ground in 9 against the dollar Over the last 11 trading days, the market chatter has triggered China deliberately weakening its currency could support its exports during a trade war, but strategists are skeptical that this would be the case.

Hartnett said that stocks now need a big negative sho ck moves much lower, or a big positive, like no Fed rate hikes to move much higher. But if the central bank fails for some reason, it means that the stock market is likely to sell off heavily, causing enough worries for Fed officials to slow down their tightening.

"[The market] can recover a little you will not break out of the assortment If people realize that it can go in July, it sells volatility, and it will be August and September when the excitement picks up again "I think it's also when you think about 2019 and think about what the numbers will look like, and that's easier after Labor Day," he said. Hartnett said there may be some volatility ahead of November's midterm elections.


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