US and China exchange tariff hikes

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Here’s our summary of key events overnight that affect New Zealand, with news the cavalier American political point-scoring is roiling international trade prospects.

The US President announced 25% tariffs on 800 Chinese products worth about US$50 bln of trade between the two countries. Beijing said it will respond in kind and now has done. The American move looks set to ignite a trade war between the world’s two largest economies.

Wall Street greeted the news with dismay, closing lower. Commodity prices tanked.

Meanwhile, American industrial production ended three straight months of growth with an unexpected decline. Output slipped -0.1% in May from April in seasonally adjusted terms, the Federal Reserve said. Analysts had expected a +0.2% rise. That lease year-on-year growth at just +1.6%. Production of consumer goods and business equipment led the numbers lower.

Going the other way, consumer sentiment rose slightly in early June due to consumers’ more favourable assessments of their current financial situation and more favourable views of current buying conditions for household durables.

In Canada, sales of existing homes hit a five year low in May, according to industry data. The data was a seven year low for May data. However, sales in Toronto rebounded, and in Vancouver they were also higher. National prices were down -6.4% year-on-year but are up a startling +11.5% in Vancouver led by townhouses and apartment prices.

In Japan, their central bank maintained its ultra-loose monetary policy overnight. It downgraded its view on inflation, signalling that it will lag well behind its American and European peers in rolling back crisis-era stimulus.

Data out of Europe overnight mostly came in as expected for trade and consumer prices. But their labour costs took a jump from +1.4% pa to +2.0%, but that was largely on the back of higher taxes on employment rather than wage or salary increases in copy a professional trader platform

In Argentina, their currency resumed its sharp downward fall caused by the sudden resignation of its central bank governor. The rapid appointment of a market-friendly figure did nothing the stop investors facing for the exits.

In Turkey, their currency slid an eye-popping -6%. There is a liquidity crunch there and 10-year bond yields rose for a third day toward the highest closing level on record, as traders braced for a deluge of debt sales next week.

The UST 10yr yield is sliding at the market close to 2.92% and down -2 bps in New York today. The Chinese 10yr is at 3.65% (up +2 bps) while the New Zealand equivalent is now at 2.94% and unchanged after yesterdays chunky fall.

The VIX is back into a normal range at 12.1, the same as this time last week. The average index level over the past year is 12. The Fear & Greed index is moving further over to the ‘greed;’ side of the index, the most we have seen that in that direction in more than a year.

Gold has tanked, down -US$23/oz in New York to just US$1,279/oz in New York.

Oil prices have also slumped today by about -US$2/bbl and the US price is now under US$65 which is now below it was at this time last week. The Brent benchmark is now just over US$73/bbl also well below this time last week. The US rig count is basically unchanged.

The Kiwi dollar is ending the week just marginally lower at 69.4 USc. On the cross rates we are at 93.2 AUc and at 59.8 euro cents. That puts the TWI-5 at 72.8 and approaching a seven week high.

Bitcoin is now at US$6.547 and little changed from where we left it last night.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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Source: CoinDesk

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