President
Trump threatened last week that he’s ready to impose tariffs on $267 billion in
Chinese goods on top of the proposed $200 billion that may come into effect
soon. The total sum would then cover all U.S. imported goods from China, which
is definitely not yet priced in the financial markets. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
U.S.
equity investors who have ignored the selloff in emerging market assets over
the past couple of months started looking a bit shaky last week. The S&P
500 ended last week 1% lower, while the Nasdaq composite declined 2.55%. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
It’s
unclear yet whether the contagion effect has started spreading into U.S.
assets, but if signs of stress begin to show in U.S. equities, expect to see
further steep selloffs in global equity markets. It requires remarkable
positive news to sway investors from the ongoing EM troubles and escalating
trade tensions - and so far, there isn’t any. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The dollar has become the destination for safe-haven flows amid the escalation
of trade tensions, but also supporting the greenback was the recent batch of
economic data. The latest ISM data showed manufacturing and service sectors
activity grew faster than most optimistic economists’ predictions.
Job
growth remains robust, but more importantly, wage growth hit a nine-year high
in August. The upcoming data this week may also show solid performance for
retail sales and consumer inflation. This should further boost expectations for
two more rate hikes in 2018, leading to further divergence in monetary
policies. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Investors
this week will also focus on monetary policy decisions, particularly emerging
markets central banks which are aiming to put an end to their currency turmoil.
The Turkish central bank will be -front and center on Thursday after
policymakers vowed to step in to contain inflationary pressures. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
I think a rate hike is imminent, but it’s the magnitude of the rate hike that
matters now. The central bank needs to push rates to more than 600 basis points
to restore investors’ confidence and bring real interest rates into positive
territory. Any disappointment here will likely lead to a continued selloff in
the Turkish Lira.
The
European Central Bank and Bank of England will also be meeting on Thursday, but
do not expect a lot of excitement here. ECB President Draghi will likely give
reassurance that the ECB bond buying stimulus program will be ending by year’s
end. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Meanwhile, investors would like to know what the BoE’s views are on the latest
Brexit talks. However, both central banks will stand pat on rates.
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