Tariffs on hold, Huawei a maybe, markets surge

US

Markets managed to express muted optimism Friday on the Trump-Xi meeting at the G-20, the DOW up a quarter percent and the S&P and Nasdaq up a half.

Trump offered his Chinese counterpart a delay on new tariffs and an easing of restrictions against Huawei in return for China’s agreement to purchase US farm products.

And yet, apart from China’s disappointing PMIs, the damage to the US economy is already apparent. Ahead of this week’s NFP, jobless claims on Thursday show a marked increase while GDP failed to gain beyond the 3.1% expected.

Pending home sales increased 1.1% from April’s 1.5% contraction, while Chicago’s PMI on Friday dropped into a contractionary 49.7 in June.

Asia

Despite the renewal of trade talks between China and the USA, China’s Caixin manufacturing PMI for May overnight fell into a contractionary 49.4, this after Sunday morning’s NBS figure showed identical data and the nation’s non-manufacturing PMI fell a tenth to 54.2.

Markets soared throughout the region, nevertheless, the Shenzhen Composite adding a whopping 3.7% this morning but the Hang Seng losing a quarter percent as street protests continue. This morning, protesters attempted to storm the island’s legislature as the number of protesters now tops the million mark.

Another place where the trade talks optimism failed to dent the gloom is Japan, where manufacturing remains at a contractionary 49.3 for the 4th month in a row as consumer confidence drops a point and a 1/3 to 38.7 in June and Tankan’s Large Manufacturing Index for Q2 dropped to 7 – just over half of the previous quarter’s. Still, the Nikkei also gained a healthy 2.15% as markets closed for the day.

Europe

While European leaders fail to reach a consensus on top EC nominations, equities managed to eke out sub-1% gains, excepting the DAX’s 1.04% before optimistic markets closed Friday. DAX futures at present are 1.48% in the green, hinting at upward pressure anticipated upon opening.

With May’s manufacturing PMIs due in from across the zone, the EU saw a welcome increase in its core CPI in June to 1.1% after Thursday’s CPIs failed to impress, the zone’s sentiment indicators for June were in the red and GDP remained mostly level.

The presidents of the European Commission, the Central Bank, the European Council and the European Parliament are amongst the positions that – following the latest EP elections – need to be filled.

Meanwhile, across the Channel, upcoming elections could focus on respective leaders prepared to leave the Union with no deal at hand. Both Labour’s Boris Johnson and Conservative candidate Jeremy Hunt are chomping at the bit, as business investments in the UK continue to contract – 1.5% in Q1 year-on-year. The Confederation of British Industry stated Sunday that the UK’s private sector has had its worst quarter in 7 years.

Commodities

Oil jumped by a dollar a barrel this morning after Russia and Saudi Arabia agreed to back a supply cut extension. Also this morning, Reuters reported that Iran had endorsed the deal, its minister expressing frustration over OPEC’s loss of authority to Russia. The gap erased Friday’s post Baker-Hughes losses – a 4-rig increase pressuring prices down by a dollar 40.

After topping out at $13,845 on Wednesday, Bitcoin has been struggling to deny a double top, that saw it lose nearly $2K in 15 minutes after crypto exchange Coinbase suffered a power outage Wednesday afternoon, and another $1000 the following day in a 20-minute period.

The previous week-long 43% bull market has been fed by growing acceptance amidst institutional financial entities and the legislative furore generated by Facebook’s Libra foray.

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