April 5, 2018, by Lorcan Roche Kelly
Time to talk
The White House’s National Economic Council Director Larry Kudlow was on a mission to calm markets yesterday following the global selloff in the wake of China’s response to U.S. proposed tariffs. “Remember, none of the tariffs have been put in place yet,” he said in a Bloomberg News interview, emphasizing that it would take at least two months before any action is taken on what are still only proposals. Cui Tiankai, China’s ambassador to the U.S., said that while consultations would be his country’s preference, “it takes two to tango.” Republicans, meanwhile, are warning President Donald Trump that an economic war with China would deal an economic blow to politically important areas ahead of November’s elections.
The reassuring words from the White House administration took all the steam out of yesterday’s early session selloff, with the S&P 500 Index closing 1.2 percent higher. That set the theme for trading in the rest of the world, with the MSCI Asia Pacific Index gaining 0.6 percent overnight, while Japan’s Topix index closed 1.1 percent higher. In Europe, the Stoxx 600 Index was 1.5 percent higher by 5:50 a.m. Eastern Time, with the DAX Index among the best gainers. S&P 500 futures pointed to an increase at the open, the 10-year Treasury yield was at 2.826 percent and gold was lower.
Shares in Facebook Inc. rallied in pre-market trading after Chief Executive Officer Mark Zuckerberg said he hadn’t observed “any meaningful impact” on the business from weeks of revelations over use of user data. Zuckerberg said he is still the right person to run the company after it revealed that data on most of its 2 billion users could have been accessed improperly. The embattled CEO is set to appear before a joint hearing of the Senate Judiciary and Commerce Committees next Tuesday.
It was PMI day in Europe, with softer-than-expected data across the board. A composite Purchasing Managers’ Index dropped to 55.2 in March, from 57.1 the previous month, adding to signs the region’s recent growth surge has peaked. In the U.K., the Markit services Purchasing Managers Index dropped to 51.7, the lowest level since July 2016, and far below economist predictions. The bad weather in March is taking much of the blame for the drop, meaning an expected interest rate hike from the Bank of England next month is unlikely to be derailed by the disappointing data.
At 8:30 a.m., weekly jobless claims data are published, with investors likely to keep a close eye on the number following last week’s surprise drop to the lowest level since January 1973, and ahead of tomorrow’s payroll numbers. The other major piece of economic data from the U.S. this morning is the February trade balance, also due at 8:30 a.m. With trade such a hot topic at the moment, there may be more interest than usual in today’s number.