April 12, 2018
U.S. Stock Futures Rise on Syria Hopes; Euro Falls: Markets Wrap
U.S. stock futures rose and Treasuries slipped as investors speculated Middle East tensions won’t erupt into a destabilizing conflict. The euro fell after Europe posted another weak economic reading. Contracts for the S&P 500 pushed to session highs after President Donald Trump hinted that military action may not be imminent, while Russia toned down its own war rhetoric. That helped equities in the U.S. and Europe ignore overnight trade rumblings from China, which dragged most Asian gauges lower. The single currency weakened after euro-area industrial output unexpectedly declined for a third consecutive month. West Texas crude edged lower following recent big gains. Investors seem wedged between competing catalysts. A key U.S. inflation measure sped to the highest in a year, but traders still took cover in Treasuries and other safe-haven assets after the White House said Trump was weighing options over Syria. Separately, a bipartisan effort emerged in Congress to protect special counsel Robert Mueller from being fired, a move that points to escalating political risk in the U.S. Meanwhile, Fed minutes showed officials leaned toward a slightly faster pace of policy tightening at their March meeting, even as they saw clear “downside risks” for the biggest economy from retaliatory trade duties. China will “unquestionably” retaliate if the U.S. further escalates trade tension, a senior Chinese trade official said.
The Growing U.K. Economy Isn’t as Strong as It Looks
One year before the U.K. is to split from the European Union, the economy has avoided the disaster scenarios predicted after the Brexit vote. Don’t get too excited. True, output has risen every quarter since the Brexit vote, expanding 1.8 percent in 2017. That far outstrips pessimistic estimates from the U.K. Treasury and others made in the immediate aftermath of the referendum. There’s more good news too: Unemployment is near its lowest since the 1970s, inflation is dropping and Bloomberg’s Brexit Barometer, which tracks 22 U.K. indicators, is at its highest in 17 months. The risk is that better-than-anticipated results could distract from imbalances within the U.K. economy as well as its relative under-performance in an international context. In fact, the nation’s stronger-than-expected expansion still was close to the bottom of the G-7 charts last year. In the neighbouring euro region, growth was the best in a decade and it surpassed forecasts far more than the U.K. did. The U.S. also saw a year of solid performance, with expectations that President Donald Trump’s tax cuts may support expansion further this year. The IMF said in January that the global recovery was the broadest in seven years, with faster growth in 120 countries accounting for three-quarters of world output.
China Says It Has a Detailed Plan to Hit Back at U.S. on Tariffs
China will “unquestionably” retaliate if the U.S. further escalates trade tension, and authorities have prepared a detailed, comprehensive counter-punch plan, a senior trade official said. The government hasn’t conducted any negotiations at any level with American counterparts recently, Commerce Ministry Spokesman Gao Feng said Thursday at a press conference in Beijing. “We can’t talk under the unilateral threat from the U.S.,” he said. Gao said recent opening-up measures announced by China have nothing to do with pressure from ongoing trade conflicts with the U.S., and that the government has never intervened to require foreign companies to share their proprietary technology as a condition of doing business in the country. “We’ll firmly push forward the Made in China 2025 plan,” he said. People’s Bank of China Governor Yi Gang unveiled specific steps to further open the financial sector Wednesday, following pledges from President Xi Jinping to liberalize finance, automobiles and other industries. The measures raised hopes that tensions between the world’s two biggest economies could ease. Bloomberg reported earlier that talks have stalled because of the U.S. request to end state support for the high-tech sector.