27 May 2019
Bassanese Bites: RBA to cut thrice – Week beginning: 27 May 2019
Trade wars continued to dominate market sentiment last week, with Trump’s latest executive order – allowing possible national security restrictions on Huawei’s US telecommunications sales – opening up a new front in the hostilities.
Following a market sell-off, Trump offered a temporary Huawei reprieve one day later, and he continues to post hopeful tweets. That said, with China’s retaliatory tariffs taking effect next weekend, it’s fair to say markets remain in a state of high uncertainty as to how this will play out. Equities understandably dropped and bond yields continued to head lower.
Sheer self interest suggests neither side really wants a damaging escalation in trade tensions, but it’s also unclear how tensions will be de-escalated given neither side wants to be seen as “caving in” to the other.
In other news, there are more tentative signs that trade tensions are starting to soften the US outlook, with the Markit manufacturing index dropping to a 9-year low of 50.6 in April (from 52.6 in March) and core durable goods orders also falling in March. That’s perhaps not surprising as new research from the IMF suggests that, so far at least, it is mainly US importers, and to a degree consumers, that are far paying the US tariffs – as Chinese exporters don’t appear to have cut their pre-tariff prices all that much.
< Back to Blog