Summary for the 14th of May 2019


China has announced yesterday that it will increase import tariffs on US goods . From the start of June, Chinese imports on 60billion dollars of US goods will get a tariff hike. About half of the 5 000 products will get a tariff increase to 25%, the rest of the goods will be get between 20, 10 and 5% hike.

The editor in chief of China’s Global Times, Hu Xijin, said on twitter that “China may stop purchasing US agricultural products, energy, reduce Boeing orders and restrict US services trade with China. Many Chinese scholars are discussing the possibility of dumping US treasuries and how to do it specifically”.

China is the biggest foreign holder of US treasuries, a sell off of treasuries will lead to rising treasury yield. Most analysts believe that China won’t be selling off US treasuries, because this will reduce portfolio’s value for the Chinese investors.

Even though the movements in the stock exchanges around the world have been weak, the market’s reaction to the trade conflict can still be interpreted as the investors are still waiting for more news. Yesterday’s news of China’s increasing tariffs on US goods have led to large decline in the stock markets. The US 10 year treasury yield fell, this shows that investors don’t believe that China is going to do a sell off of US treasuries.

Due to the British politicians haven’t managed to agree on a Brexit deal, the UK will have to participate in the 2019 European Parliament election on next Thursday. The British prime minister, Theresa May has said that she will resign as prime minister once the British parliament agrees on a Brexit deal. Financial Times analysis suggests that the Conservatives are now only the fifth biggest political party, with only 10% of the supports, due to their supporters deflecting to the anti-EU party, founded by the prominent leave campaigner Nigel Farage.

Indices for 14th of May.
Dow: -2.4% (13th of May)
S&P 500: -2.4% (13th of May)
Nasdaq: -3.4% (13th of May)
Nikkei: -0.8%  (14th of May)
Chinese indices: -1.7% (14th of May)
STOXX Europe 600 Index: +1.01% (14th of May)

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