Dollar Thumped On Confirmation Of Tariff Delay While Stocks Advance

Overview: The extension of the US-China tariff freeze had been telegraphed, but the confirmation is the single biggest driver of the day. Equities, led by a 5%+ advance in China, have rallied in Asia and Europe. Benchmark 10-year bond yields are mostly 1-2 basis points higher. Peripheral yields are lower.  Fitch's decision before the weekend, affirming Italy's rating, help ease fears ahead of Moody's (March 15) and S&P (April 26) reviews. The dollar is softer against nearly all the major and emerging market currencies. Oil and gold are firmed, while the threat of expanding strike activity in South Africa is lifting the platinum group metals, with palladium at new record highs.

Asia Pacific

An extension of the tariff freeze that was supposed to end on March 1 was widely expected but the confirmation late yesterday one of the most important developments. It is not clear how long the extension will be, though it will obviously be sufficient to cover the Trump-Xi meeting, which could be a month away. Before the weekend, many got excited with Mnuchin's claim that a currency agreement was struck, though no details were available and the weekend press suggested that the enforcement mechanism had yet to be agreed. Among other things, the tension between the US Trade Representative and the President seemed to reveal that Trump's desire for an agreement is palpable. Ironically, former economic adviser, Cohn seemed to have resigned over Trump's commitment to the tariff strategy, but now appears to be antagonizing his trading representative by being too willing to cut a deal.  

With today's gains, Chinese shares are now 20% above last month's lows. Recall that the Shanghai Composite posted a bullish outside up day before the weekend to close above the 200-day moving average. The Composite gapped higher and closed on its highs. While trade was a major consideration, there is another force at work. There is a key Politburo meeting at the end of the week. The focus is expected to be capital market reforms. Securities firms were among the best performers today.  

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Read more by Marc on his site Marc to Market.

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