Friday, May 17, 2019

Markets decline as trade negotiations stall

Dow fell 42, decliners over advancers 5-2 & NAZ lost 31.  The MLP index was about even in the 254s & the REIT index pulled back 1+ to the 383s.  Junk bond funds drifted lower & Treasuries inched higher in price.  Oil went up in the  63s & gold dropped 7 to 1278.

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GC=FGold1   ,279.401-6.80-0.5%

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The White House announced it will delay a decision to impose tariffs on imported autos & parts by 180 days.  Pres Trump, in a proclamation, provided these details.  "I have decided to direct the United States Trade Representative (Trade Representative) to pursue negotiation of agreements contemplated in 19 U.S.C. 1862(c)(3)(A)(i) address the threatened impairment of the national security with respect to imported automobiles and certain automobile parts from the European Union, Japan, and any other country the Trade Representative deems appropriate, and to update me on the progress of such negotiations within 180 days. Under current circumstances, this action is necessary and appropriate to remove the threatened impairment of the national security."  Earlier this week, Commerce Secretary Wilbur Ross detailed a recent meeting between Pres Trump & Japan's Prime Minister Abe.  "While there were some very clear statements by the President, the tone was friendly," said Ross, adding the 2 world leaders played a round of golf following trade discussions.  The delay comes ahead of a May 18 deadline in which Trump would have proceeded with tariffs of up to 25% on European made cars & parts.  In Feb, the Commerce Dept submitted a report to Trump saying he could justify auto tariffs based on national security concerns.  Automakers have warned a 25% tariffs would backfire, driving up the cost to US consumers & resulting in job loss for the auto industry.

Trump administration delays auto tariff decision by 180 days

Consumer sentiment rocketed to its highest level in 15 years in early May as Americans grew more upbeat on the health of the economy & its path in 2019.  The Univy of Mich preliminary print on its consumer sentiment index rose to 102.4, up from 97.2 in Apr & well ahead of economist expectations of 97.5.  “Consumers viewed prospects for the overall economy much more favorably, with the economic outlook for the near and longer term reaching their highest levels since 2004,” said Richard Curtin, chief economist for the Surveys of Consumers.  “To be sure, negative references to tariffs rose in the past week and are likely to rise further in late May and June.”  The optimistic consumer outlook was mostly recorded before US-China trade deliberations soured earlier this month.  Last week, the Trump administration raised tariffs to 25% from 10% on $200B worth of Chinese goods in response to Beijing's attempts to renegotiate a trade agreement between the world's 2 largest economies.  China then responded in kind, bumping taxes on $60B worth of US goods in retaliation.  Aggravated trade tensions between the US & China could dampen consumer sentiment going forward, Curtin said, & will likely weigh on subsequent reports in May & Jun.  “Even apart from the direct impact of tariffs on prices, rising tariffs could cause a more general loss of confidence which could further diminish the pace of consumer spending,” Curtin wrote.  “At present, the data point toward moderate spending growth in the year ahead. Nonetheless, the data indicate the corrosive impact of an escalating trade war.”

US consumer sentiment surges to highest level in 15 years

The US bullied China during trade talks, a Chinese Commerce Ministry official said.  Pres Trump & the US escalated trade talks with “bullying behavior” & were the reason why they fell apart, a spokesperson for the Chinese Ministry of Commerce said.  “The two sides had open and constructive communication during the 11th round of the China-U.S. high-level economic and trade consultations,” the spokesperson said.  “However, it is regrettable that the U.S. side unilaterally escalated trade disputes, which resulted in severe negotiating setbacks.”  The US & China have been involved in a trade dispute for over a year, but the trade war has heightened since the beginning of May.  Trump hiked tariffs on $200B worth of Chinese goods last Fri & China retaliated on Mon with tariffs on $60B worth of imports.  Investors are bracing for potential new tariffs, as Trump has threatened to put additional levies on $300B worth of Chinese goods.  China will be forced to respond, the spokesman said, although he added: “China always believes that raising tariffs is not a solution to the trade frictions.”  “We urge the U.S. side to correct wrongdoings as soon as possible to avoid causing heavier damages to businesses and consumers in both countries and dragging down the global economy,” he added.  Earlier in the week. US markets tanked on the trade news but the major indices earned back their loses by yesterday's close.  They opened lower today.

China accuses the US of ‘bullying behavior’

Trade negotiations are not going anywhere with no meetings today or scheduled for next week.  The delay in auto tariffs was already announced, so the official statement was expected.  Meanwhile consumer confidence data looks good, at least for the time being  With summer just a few weeks away, some traders may have already started their weekend holiday.

Dow Jones Industrials

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