The US and China’s delegation led by Liu He failed to make a late breakthrough ahead of the midnight US tariff increase to 25% from 10% on $200B of Chinese goods, and China’s Commerce Ministry immediately announced it would take countermeasures. Equity markets took the news in stride, with the NIKKEI up 0.3%, the SCI up 3.1% (China’s state funds jumped in after initial slump), European shares were up from 0.5% to 1.1%, and S&P futures were flat. Firmer oil (WTI from $61.52 - $62.23) was supportive for stocks. The US 10- year bond yield was relatively steady between 2.439% - 2.467%, and the DX was also stable but trending down between 97.31 – 97.45. The greenback had some modest pressure from a slightly higher euro ($1.1220 - $1.1238) from a stronger German Trade Balance and the pound ($1.3000 - $1.3027 on stronger UK industrial and manufacturing production data. Gold was fairly steady as well, trading in a narrow range of $1283.25 - $1287.15.
Ahead of the NY open, some tweets from Trump regarding US-China trade unnerved markets:
Talks with China continue in a very congenial manner - there is absolutely no need to rush - as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S....
Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch! In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with “murder!”
7:48 AM...