Friday 31st May: Trumpomania drags markets lower

Global Markets:

• Asian Stock Markets : Nikkei down 1.70%, Shanghai Composite down 0.26%, Hang Seng down 0.64%, ASX down 0.05%
• Commodities : Gold at $1292.60 (+0.43%), Silver at $14.49 (+0.01%), Brent Oil at $64.69 (-0.98%), WTI Oil at $56.13 (-0.81%)
• Rates : US 10-year yield at 2.170, UK 10-year yield at 0.899, Germany 10-year yield at -0.171

News & Data:

• (CNY) Manufacturing PMI 49.4 vs 49.9 expected
• (CNY) Non-Manufacturing PMI 54.3 vs 54.3 expected
• (USD) Prelim GDP q/q 3.10% vs 3.10% expected
• (CAD) Current Account -17.3B vs -18.1B expected
• $3 million for gender affirming surgeries in NZ Budget 2019
• Donald Trump and Xi Jinping meeting firms for G20 in Japan next month

Markets Update:

Asian stock markets are mixed on Friday as the positive cues overnight from Wall Street was offset by escalating trade tensions as well as data that showed China’s manufacturing activity for the month of May missed expectations.

U.S. President Donald Trump announced that a 5 percent tariff will be imposed on all Mexican imports from June 10. Trump also said the tariffs will be gradually increased if Mexico does not take steps to curb illegal immigration across the border to the U.S.

Japan’s Nikkei 225 slipped 1.7% in afternoon trade, with the Topix index also trading down by 1.1%. Over in Australia, the ASX 200 traded fractionally higher, while South Korea’s Kospi rose 0.2%. Mainland Chinese stocks were seesawed through the day, with the Shanghai Composite lower by 0.3% and the Shenzhen composite also lower by a similar amount. In Hong Kong, the Hang Seng index shed earlier gains to slip 0.6%.

Bonds extended their bull run with 10-year Treasury yields now down a steep 33 basis points for the month and decisively below the overnight funds rate. Such an inversion of the yield curve has presaged enough recessions in the past that investors are wagering the Fed will be forced to ease policy just as “insurance”. Those declines have kept the U.S. dollar relatively attractive from a yield point of view and it was trading near a two-year high against a basket of currencies at 98.115.

Oil prices fell to their lowest in almost three months on fears a global economic slowdown would crimp demand.

Upcoming Events:

• 01:30 PM GMT – (CAD) GDP m/m
• 01:30 PM GMT – (CAD) RMPI m/m
• 01:30 PM GMT – (USD) Core PCE Price Index m/m
• 01:30 PM GMT – (USD) Personal Spending m/m
• 02:45 PM GMT – (USD) Chicago PMI
• 03:00 PM GMT – (USD) Revised UoM Consumer Sentiment
• 05:00 PM GMT – (USD) FOMC Member Williams Speaks
• &more…