Summary:

  • US President Donald Trump is going to impose tariffs on steel and aluminium imports, a big move kicking off possible trade war
  • Wall Street plunges following the Trump’s announcement, US dollar trades lower as well
  • Japanese unemployment surprises to the upside, but inflation remains still off the target

Announcing fresh tariffs on steel and aluminium imports US President Donald Trump has probably commenced a new chapter in global trade war, a move which sent Wall Street and the US dollar lower. He announced 25% tariff on imported steel and 10% on aluminium for “a long period of time” adding on Twitter “our steel and aluminium industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world”. The move sparked immediate concerns of retaliation from the biggest trade players in the world.

We did not have to wait too long to hear first harsh responses. For one, Germany called into question an imposition of new tariffs as they violate WTO rules. Australian trade minister labelled the US contentious idea as ’disappointing’ adding his country will be seeking exemptions from new taxes. In turn, the board of Toyota warned that new tariffs on steel and aluminium are likely to raise car and truck prices in the United States. As you can see this move could act in favour of mounting inflationary pressures, but even as some sectors could benefit overall it is not a good deal for the US and especially for global trade.

link do file download linkUS steel and aluminium stocks performed well after the tariff announcement. Source: FT

In response to the announcement major indices on Wall Street deepened their declines ending the day with gloomy moods. At the same time stocks focused on those particular sectors advanced but even healthy gains there were not sufficient to offset broader falls. The SP500 (US500 on xStation5) lost 1.3%, the NASDAQ (US100) closed down 1.3% while the Dow Jones (US30) plunged almost 1.7%. The US dollar is trading lower in the morning alike being among the worst performing currencies in the G10 basket as new tariffs could hurt the US economy at least in the eye’s of currency investors.

link do file download linkThe SP500 neared its crucial support at 2680 points which, if broken, could allow sellers to continue this week’s bear market. If the ongoing downward move continues one may count on a plunge at least toward 2540 points where a more notable support area can be localized. Source: xStation5

Grim moods spread over Asian market as well as the NIKKEI (JAP225) closed down 2.5% and the Hang Seng (CHNComp) tumbled roughly 2%. In terms of macroeconomic data we were offered overnight it’s worth mentioning a package of Japanese readings. While the labour market surprised to the upside (again) illustrating the jobless rate falling from 2.7% (revised down from 2.8%) to as low as 2.4% (no change had been expected), though the job to application ratio stayed unchanged at 1.59. However, the inflationary front remained much less upbeat as inflation did not move too much showing any convincing inflationary pressures ahead (despite further tightening in the labour market). Headline CPI barely grew from 1.3% to 1.4% matching market expectations, albeit the core gauge (stripping out fresh food) beat forecasts coming in at 0.9 against 0.8% expected (a pick-up compared to 0.7% in January). Finally, the core-core measure (excluding fresh food and energy) increased from 0.4% to 0.5% in line with the consensus.

link do file download linkThe USDJPY continues falling following weakness in the US dollar and better readings from the Japanese labour market. A weekly time frame seems to be giving hope for bears to keep on declining over the next weeks and probably months in the longer-term. Source: xStation5