Well this is shaping up to be a sour day in terms of risk sentiment.
Overnight, Hong Kong and mainland shares surrendered early gains following China’s move to follow the Fed by hiking OMO rates.
Specifically, the Hang Seng and H-shares fell on Thursday, with the latter erasing what was a 1.6% gain:
On the mainland, the SHCOMP fell 0.5% and the ChiNext was lower by 0.7%:
This comes ahead of Trump announcing tariffs today that are reported to take aim at more than 100 types of Chinese goods totaling $50 billion. That’s based on what America apparently thinks the IP damage inflicted by China has been.
“Tomorrow the president will announce the actions he has decided to take based on USTR’s 301 investigation into China’s state-led, market-distorting efforts to force, pressure, and steal U.S. technologies and intellectual property,” White House official Raj Shah said yesterday.
China will of course retaliate. Here’s the statement from China’s Ministry Of Commerce:
We have noticed that there have been recent reports that the United States will soon announce the results of its investigation of China 301 and may impose restrictions on China. With regard to the 301 investigation, China has expressed its position on many occasions. We firmly oppose this kind of unilateralism and trade protectionism by the United States. China will never sit back and ignore the legitimate rights and interests. It will certainly take all necessary measures to resolutely defend its legitimate rights and interests.
President Xi Jinping pointed out that economic and trade relations are the “ballast stones” and “propellers” of Sino-U.S. relations. The two countries established diplomatic relations nearly 40 years ago, the scale of trade has increased by 232 times, and the cumulative amount of two-way investment has exceeded US$230 billion. U.S. industry is generally worried about U.S. unilateral action. There are already 45 U.S. business associations that have explicitly raised objections.
We hope that the United States will understand the nature of the mutually beneficial and win-win outcomes of Sino-U.S. economic and trade relations and will not take actions that harm others.
Again, this is a bad idea and it’s yet another step down the road to an actual, “hot” trade war – you know, the one everyone hopes and prays Trump will avoid but which looks increasingly likely with each passing week.
Meanwhile, the data was for shit in Europe overnight as PMIs missed across the board:
- Eurozone March Flash Manufacturing PMI 56.6; Est. 58.1
- Eurozone March Flash Services PMI 55; Est. 56
- Eurozone March Flash Composite PMI 55.3; Est. 56.8
- Germany March Flash Manufacturing PMI 58.4; Est 59.8
- Germany March Flash Services PMI 54.2; Est 55
- Germany March Flash Composite PMI 55.4; Est 57
- France March Flash Composite PMI 56.2 Vs 57.3; Est 57
- France March Flash Manufacturing PMI 53.6; Est 55.5
- France March Flash Services PMI 56.8; Est 57
Yeah. Between that, the Fed hike, and the tariff threat, European shares are lower across the board. The euro pared its post-Fed gains so maybe if it fades enough, that will help equities across the pond:
There’s still plenty of time for things to turn around (so BTFD people), but as noted here at the outset, the mood is sour.
Futures are extending losses:
Oh, and Facebook is under pressure again. It looks like Zuckerberg’s effort to assuage the market last night on CNN isn’t going to be enough.
So yeah, markets are feeling a bit nauseated on Thursday morning. But hey, this was the plan, right? After all, isn’t this what we wanted? A government neophyte as President and a “plain speaking” Fed chair?
It’s all love, really.
