May 22, 2018, by Lorcan Roche Kelly
Authorities in China announced that they would reduce import duties on passenger cars from 25 percent to 15 percent, effective July 1. The move comes as trade hostilities between the country and the U.S. ease following meetings in Washington last week. Shares of Jaguar Land Rover owner Tata Motors Ltd. and BMW AG jumped on the news. The Trump administration has been criticized by hard-liners for walking back on tariffs on Chinese imports. Divisions have emerged in the White House between free-trade supporters such as Treasury Secretary Steven Mnuchin and White House economic adviser Larry Kudlow, and China hawks led by White House trade adviser Peter Navarro.
With the heat gone out of China trade negotiations, President Donald Trump is free to concentrate on two other major diplomatic goals: making a new Nafta agreement, and his upcoming summit with North Korean leader Kim Jong Un. On North American trade, Canada and Mexico are signaling that a deal can be done ahead of the final deadline in a couple of weeks. Should the president feel more time is needed for a better deal, it would be up to a post-midterm election Congress to approve it. Meanwhile, South Korean President Moon Jae-in is due to meet with Trump in the White House today to try to restore momentum for the North Korean meeting scheduled for next month in Singapore after after Kim Jong Un threatened last week to walk away if the U.S. makes “ one-sided demands.”
In Italy, the populists have agreed a nominee for the position of prime minister, selecting politically inexperienced Giuseppe Conte, a 53-year-old law professor, for the post. President Sergio Mattarella, who has already expressed concern at some of the coalition’s proposals, may take a few days to confirm the nomination. On the other side of the continent, Brexit negotiators are back in Brussels today, with both sides meeting for the first time since Prime Minister Theresa May proposed a compromise on customs to solve the problem with the Northern Ireland border. The meeting comes as speculation is growing that there could be another U.K. general election held before the end of the year.
Overnight, the MSCI Asia Pacific Index rose 0.2 percent, while Japan’s Topix index closed 0.2 percent lower with insurance companies and retailers weighing on the benchmark. In Europe, the Stoxx 600 Index was broadly unchanged at 5:45 a.m. Eastern Time with Italian stocks staging something of a recovery following yesterday’s selloff. S&P 500 futures pointed to a small gain at the open, the 10-year Treasury yield was at 3.069 percent and gold was slightly higher.
Facebook Inc.’s Mark Zuckerberg is due to appear before European lawmakers in Brussels at 12:15 p.m. today to answer questions on privacy failures at the social network. On the data front, it is a quiet day in the U.S., with the 4:30 p.m API weekly oil inventory report the only release of note. Keep an eye on Argentina, where the central bank announces its seven-day repo rate which is currently at 40 percent.