Asia
Chinese stocks fell on Friday as President Trump’s determination to push through $50 billion of trade tariffs unsettled domestic equities. The Shanghai Composite Index dropped to 2016 levels just above 3,000 points. This level is seen as the key for Chinese investors: the Shanghai index has not been below 3,000 since the summer of 2016, and has been as high as 3,500 late in January when global markets were at their recent peak.
US markets are providing little inspiration at the moment as investors there fret about world trade from the other side, Fed tightening and high valuations for technology stocks.
Japan was the exception today, as equities were boosted by a softer yen after the Bank of Japan downgraded its inflation expectations. The BoJ stills seem de-coupled from the narrative of monetary tightening among developed market central banks and there is no sign of this ending any time soon. VAT is set to rise in Japan so the central bank is cautious about tightening monetary policy at the same time.
Europe
The eurozone’s major markets were modestly higher approaching midday on Friday as a modest recovery in the euro on Friday morning held back gains. The European Central Bank yesterday made good on its promise to announce significant news yesterday. QE is being phased out from October this year and will disappear from 2019 onwards.
The cautious note struck by the ECB – against that of the Federal Reserve on Wednesday – put pressure on the euro against the dollar yesterday. The currency uplift pushed the Dax above 13,000 points yesterday, a level it held on Friday. The German index made an attempt to push above 13,000 in May but that hasn’t been maintained in the last few weeks.
The eurozone’s consumer price index rose as expected to 1.9% in May against the same month last year and higher than the 1.2% rise in April 2018.
Rolls-Royce (RR) shares were the biggest riser on the FTSE 100 this morning after it announced significant UK job cuts and restructuring. Tesco (TSCO) was also a big riser after it updated the market on its first quarter sales.
North America
With this month’s Federal Reserve meeting and historic Trump-Kim summit out of the way, investors can now focus on the intractable problem of US-China trade. Dow futures show the index falling 150 points at the open as traders digested the prospect of a second wave of trade tariffs imposed on China by the United States.
In economics, the provisional University of Michigan sentiment index for June is released today and it is expected show a rise on May’s level. A rise would be consistent with the Fed’s upbeat assessment on the US economy at its latest meeting.
Looking ahead to next week, Fedex (FDX) is one of the biggest names reporting earnings.