Markets shrug off latest trade tensions

News that the US intends to significantly ramp up their existing tariffs on Chinese imports caused a swift swoon lower in stock futures overnight, but as the dust settles it appears to have had little adverse impact on the markets. In fact most of Asia finished higher and European benchmarks have also begun brightly with the German Dax hitting a 2-week high and the FTSE adding around 15 points as it retests recent resistance around 7320.

Sell the rumour buy the fact?

The price action following this latest increase in trade tensions could be seen to be particularly telling with stocks seemingly looking through what is quite clearly negative news as far as global growth is concerned. The reasons for this may be twofold; first the announcement was long telegraphed with reports of the $200B in additional levies from the US hitting the wires late last week and therefore when it was confirmed overnight, it didn’t come as too much of a shock - even though the promise to ramp up the 10% tariff to 25% by year-end unless a deal can be reached as well as an increase in scope, from less than half of Chinese imports to all of them should they retaliate in kind, was more stringent than many expected.

Secondly, and perhaps more importantly, there’s still a feeling that this is more a case of threats and posturing rather than what the Trump administration ultimately wants. Given the stance taken by the president in dealings with Russia and North Korea, it would come as little surprise should he back down on his hostile position on trade ahead of the midterms in November and declare it another victory in the battle to make America great again.  

Oil jumps on OPEC and Saudi comments

There’s been a strong move higher in the price of crude in the past hour after a couple of comments sparked a flurry of buying. OPEC have warned that there are threats to its supply from producers such as Iran, who themselves are subject to US influence at present with the sanctions soon to be implemented possibly taking as much as 10% of the groups daily supply off the table. Not long afterwards reports that Saudi Arabia are “comfortable” with Brent Oil moving above $80 a barrel has caused an immediate impact, with the front month contract dutifully moving towards this level after jumping over 100 ticks to trade above the $79 mark. This international benchmark for the price of oil has been in a $10 range from $70.50-80.50 for the past 5 months, but these latest comments have pushed the market towards the upper bounds of this and a breakout to the upside could be not too far off.