Friday May 10 2024 14:21
4 min
President Biden is set to announce new tariffs on China, possibly next week, targeting strategic sectors such as electric vehicles. Nevertheless, the Hang Seng extended its rally by another 2% to reach its best in almost a year.
Mainland Chinese stocks were more mixed in reaction to the tariff news with Shanghai flat and Shenzhen down half a percent.
European stocks got out of the gate well early Friday with the FTSE 100 making yet another record high above 8,400... What were we concerned about? Maybe that BHP takeover bid for Anglo was what the market needed.
Perhaps it’s just the long-awaited closing of the valuation gap. Maybe it’s just that there was enough attention on London after years of investors being rather cool – maybe the media did a good job of shining a light on how cheap the stocks were. Germany’s DAX index also rose by around 0.4% to notch another record. Wall Street rose on Thursday with Treasury yields ticking back down.
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Markets seem to be happy that the macro outlook is generally quite positive. Crashing recession avoided, cuts coming. Not quite Goldilocks but good enough. Here’s TS Lombard:
“Goldilocks is wobbling ... a large miss on NFP, weak PMI numbers, but the fat-left tail of Fed hikes has been removed. The next policy move is a cut; and even if that cut is still months away, we are already past the peak tightening impulse.”
The Bank of England left rates on hold yesterday with a 7-2 vote split on the Monetary Policy Committee. Inflation forecasts for the next 2-3 years were revised down.
Cuts seem around the corner. Figures today show GDP growth exceeded expectations in the first quarter. IAG expects a summer boom in travel. Consumers are coping with higher rates and the inflation shock pretty well.
Sterling was initially sold on the BoE decision but has come back to test the 200-day line. My thinking is that June is a goer.
Governor Bailey said a June cut is neither ruled out nor in. But he added that |it’s likely that we will need to cut bank rates over the coming quarters…possibly more so than currently priced into markets.” Always saying a little bit too much – there is a long way to go with the data.
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