US tariffs on Chinese goods are officially in effect! The move came after Thursday’s discussions between the US and China made little progress. A statement from China’s Commerce Ministry said it will be forced to retaliate though no detailed measures were mentioned. March trade data released Thursday saw the gap deficit with China narrowing about 12% compared to Q1 2018 with the imports from China being at their lowest since March 2016. US stocks continued their slide closing 0.30% down for the S&P, 0.41% lower for the NASDAQ and the DOW suffering the heaviest at -0.54%. Yield on 10Y USTs was slightly changed at 2.452%.
Asian stocks swung in a volatile session having started the day strong but began losing the gains as the tariff deadline neared. The Nikkei, up 0.24% at start of trading, fell as much as 0.8% in mid-afternoon trading Japan time while the Hang Seng and the CSI remained in the green despite some losses at 0.6% and 1.5% respectively in the late morning session. China inflation data released Thursday saw an increase in CPI at 2.5% YoY meeting analyst expectations and up from March’s YoY figure of 2.3%. Food inflation soared 6.1% largely due to the 14.4% rise in pork prices because of the swine fever.
In an apparent show of the stalemate in Tory-Labour Brexit talks labour leader Jeremy Corbyn called on the government “to move its red lines.” This he said while launching his party’s European elections campaign. The sore point of the negotiations remains the type of trade agreement – a hardline customs union arrangement favoured by Labour or a customs-union-type agreement which any subsequent government can always change depending on its policy favoured by May. There was no mention of the Brexit Bill in next week’s Parliament business during an announcement by the House of Commons leader, Andrea Leadsom. The pound closed just about flat against the dollar at 1.3007 while yield on 10Y UKTs was at 1.1239.
Outgoing ECB President Mario Draghi has defended the bank’s inflation goal saying he sees increasing wage pressure as helping the institution meet its mandate. This he said while addressing students in Frankfurt despite the seeming failure to keep price growth at just under 2% in the medium term despite trillions of euros that have been poured in as stimulus. The strategy has been the focus of debate among hopefuls eager to replace him. The euro gained marginally closing at 1.1227 against the dollar while yield on 10Y DBRs was about flat at -0.047%.
Turkey’s central bank suspended one-week repo auctions as it fights to strengthen its battered currency. In a move that resulted in the increase of about 150bps on the cost of funding without a formal increase in the benchmark rate, the regulator is ceasing to provide liquidity at its cheapest rate of 24% attributing the decision to volatility in the market. In a separate statement, the central bank lowered the amount of foreign currency commercial lenders are required to park with the regulator as part of their mandatory lira reserves soaking up 7.2 billion liras from the system. The currency is among the worst performing emerging market currencies this year and has been under increased pressure of late following the successful challenge by the ruling party on Istanbul elections which the market fears is an erosion of Turkey’s democracy.
In the latest sign of Brazil’s Q1 contraction retail sales rose less than almost all analyst forecasts from a Bloomberg survey. March sales increased only 0.3% month-on-month against a median forecast of 0.9%. The weak retail figure comes as economists have cut 2019 growth forecast for 10 straight weeks with President Bolsonaro’s pension reform proposal is facing hurdles in Congress. BRAZIL 47s fell marginally to close at 98.992.