Liberation or Obliteration

Good morning

US equities responded badly to Trump’s war on global trade.  The Dow Jones was down 4%, S&P down 5% and Nasdaq was down 6%.  This was despite Trump himself saying markets would ‘boom’ as a result of the tariffs.  Weaker than expected US data yesterday did nothing to help the rout, ISM services PMI was 50.8 vs an expected 53, while Challenger job cuts soared to 275k from an expected 172k, most of which was attributable to DOGE.  What this means for today nonfarm payrolls remains to be seen, markets are looking for something in the +135k region with an unchanged unemployment rate of 4.1%.

The chances of a US recession this year have grown and inflation must surely push higher.  There is a growing feeling that countries impacted by the higher tariffs will not only retaliate but be pushed to seek trade relationships elsewhere, leaving the US very much on its own.  EU have already looked at a South America trade deal to offset the US tariffs.  Those losses in the equity markets yesterday added to losses already seen since Trump’s Presidency, they are down around 10% since he took the helm.  Liberation Day has been renamed as Obliteration Day by some.  Wish I’d thought of that. 

The US dollar has weakened pretty much across the board although is off its lows.  EURUSD hit a high of 1.1145 yesterday, now 1.1050, GBPUSD touched 1.3200 but has fallen back sharply to 1.3050, which has dragged GBPEUR to within a whisker of 1.1800, pretty much the Jan 25 lows.  We have to go back to Aug 24 to see levels below 1.1800.  I’m looking for answers as to why GBP has been hit so hard, I wonder whether it is Trumps comments about pharmaceuticals being next in line for tariffs, given UK’s exports t the US in this sector.  

AUD continues to struggle as the market prices in more RBA rate cuts, now 0.6225 against USD and around 2.1000 vs GBP.  NZDUSD is 0.5700, GBPNZD around 2.2900, both pairs at multi-year highs.  CAD remains strong having avoided the recent tariffs, USDCAD now 1.4145, GBPCAD 1.8425.  ZAR continues to trade on the weak side, USDZAR is up at 19 while GBPZAR is 24.75 having knocked on the door of 25.00 briefly yesterday afternoon.  Jan 2016 was the last time we were up at these levels,

In sport, Spurs lost 1-0 to Chelsea last night, a result that came as no surprise other than the fact I’d thought it may have been a bigger goal margin.  Spurs next couple of premier league matches are against Southampton and Wolves, which may off the chance of some much needed points before they face Forest and Liverpool in late April.  In between we do have the small matter of the Europa league, next week brings the quarter finals.  Could Spurs win a trophy after the shocking league performances?

The pick of the premier league action this weekend could well be Forest v Villa, although the Manchester derby could throw up some excitement as well.  Arsenal and Liverpool will both be hoping to take all three points in their matches against Everton and Fulham respectively.  The weekend also bring the Japanese F1 grand prix, tomorrow also brings the Grand National, always difficult to pick a winner and none of the names are really jumping out at me other than the favourite, I Am Maximus at 8-1.

While todays nonfarm payrolls is certainly the main event, much focus will be on Feds Powell who speaks later in the day.  We’ll be interested to hear his take on the tariffs, global trade and a possible US recession.  Also watch for any signs of Trump backtracking on tariffs, he’s already talking about making deals with countries who offer better terms.   

Have a great day and a great weekend if we do not speak before

-  09.00 ECBs de Guindos speaks

-  13.30 US nonfarm payrolls

-  13.30 CAD employment

-  16.25 Feds Powell speaks

-  17.00 Feds Barr speaks

-  17.45 Feds Waller speaks