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From the Floor: Markets under pressure as Trump ups the ante

  • Trade war escalates but how much is just political bluster?
  • Trump seems peeved that China is 'targetting his voters' 
  • The market seems to want to buy USD, it's trying to rally 
  • Average hourly earnings result is key today with +2.7% expected 
  • Inflationary pressures could be back in the frame next week 
  • Equities: tariff tiff good EM, utilities, telecoms and healthcare 
  • Equities: bad for banks, industrials, consumer discretionary, US equities
By Clare MacCarthy

Nerves are on edge and risk sentiment has soured after President Trump said he was considering tariffs on an additional $100 billion of Chinese imports. And with the pace of the trade fracas escalating daily the key question now, says John Hardy, Saxo's head of FX strategy, is "how much of this is political bluster and what shape will the final settlement be?"

But while´market response to these new threats takes the expected risk-off form there's "a little less amplitude on that move", Hardy says. "I think it's pretty impressive, we've seen the dollar trying to rally; it heads back lower on these announcements and then bobs back higher pretty quickly and it did so again overnight with dollar-yen visiting 107.00 and then bouncing back towards its resistance level" [chart below].

 Source: Saxo Bank 

Meanwhile, several Asian indices turned lower overnight on the US-China developments and "equity volatility will remain elevated", says Peter Garnry, Saxo's head of equity strategy. "The bigger question is when it spills firmly into other asset classes. Trade retaliations are still noise but the probability is going up that it will spin out of control."

For all that, the average hourly element of the US nonfarm payrolls data is the only metric that the markets will care about today, Garnry says. The consensus expectation is for wage growth of 2.7%, which is slightly above the 12-month average.


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