UK production dives, US expands Iran sanctions

Asia

Trump’s administration’s decision to hold off with Mexican tariffs yesterday has Asian markets in an upward endeavour, the Shenzhen Composite closing 2.9% up, Nikkei up a third and the Hang Seng adding 0.75%.

The latter is beleaguered, however, by unrest in Hong Kong, where more protests and strikes are expected in objection to the mainland’s proposed new extradition laws, which threaten the independence of the island as a global financial hub.

Local business leaders are warning that pushing the law could undermine investor confidence erode competitiveness. Reuters reports that State Department spokeswoman Morgan Ortagus said the law could “subject our citizens residing in or visiting Hong Kong to China’s capricious judicial system,” and Congress is threatening to “re-examine elements of its relationship with Hong Kong.”

US President Donald Trump said yesterday he was preparing to launch a fresh round of tariffs on Chinese imports following his meeting with Chinese President Xi Jinping at the G20 summit in Japan next week. In Australia, business confidence in May was up to 7 from the previous zero reading in April, leaving the AUD level ahead of tonight’s consumer confidence index.

Europe

With industrial production improving somewhat in Italy (it contracted by only 0.7% in April), Britain is beginning to feel the Brexit brunt in manufacturing production (down 3.9% MoM in April) and industrial production (-2.7%).

Although the National Institute of Economic and Social Research yesterday published a GDP estimate for the 3 months preceding May of 0.1% growth, the National Statistics bureau yesterday published a 0.4% GDP contraction – its worst since the Brexit vote vicinity in March 2016.

Still, and despite the drop in car production, April’s Goods Trade Balance for April shows a £12.113 bn diminishing deficit (1 billion better than expected) and a total trade deficit, precisely half of March’s £5.4 bn. Bank of England policymaker Michael Saunders said the bank would probably raise interest rates sooner than expected to prevent inflation.

US

The US Bureau of Labour Statistics yesterday presented a better-than-expected 7.5 mn Job Openings and Labour Turnover (JOTLS), in April. Layoffs are up 1.2% and voluntary job departures steady at 2.3%.

Canada’s housing sector saw a better-than-expected 15% increase in housing starts – 202K units in May YoY. Meanwhile, Bloomberg reports that the US administration is considering sanctioning Iran’s Special Trade and Finance Institute – its humanitarian trade go-between with Europe.

Commodities

Oil continues trending between $53 and $55 per barrel after Russia yesterday confirmed it would support the OPEC+ supply cuts extension. Gold trading is holding steady after its weekend drop on USD strength, following Trump’s decision to delay imposing tariffs on Mexico.

And finally, after completing a 3-week head & shoulders pattern, bitcoin trading continues straddling the $8,000 level, as traders await the US Internal Revenue System’s guidelines on crypto taxation.

Although deemed a commodity by the Commodity Futures Trading Commission in 2015, the IRS must contend with matters, such as how to treat cryptos received as income, how to value a commodity with varying prices between exchanges, and so forth.

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