Saturday, 11 May 2019

Markets shrug off tariff increase

Markets mostly rose on Friday.

The S&P 500 rose 0.4 percent and the STOXX Europe 600 rose 0.3 percent.

Earlier in Asia, the Nikkei 225 fell 0.3 percent but the Shanghai Composite surged 3.1 percent.

Markets appear to have mostly shrugged off the actual initiation of increased US tariffs on China imports.

“Given how much markets have corrected over the past few days, you would expect some short covering,” said Ken Wong, Asia equity portfolio strategist at Eastspring Investments.

“Despite the tariff increase, the outlook for a trade deal in the relatively near future remains cautiously optimistic,” wrote Tom Essaye, president of the Sevens Report, in a note.

Still, Nick Marro, analyst at the Economist Intelligence Unit, said that the potential for a deal “has gone down significantly”.

Allan von Mehren, chief analyst and China economist at Danske Bank, wrote: “A trade deal getting less likely in Q2 after Trump’s moves today...hopefully we can get a short break from Trump’s tweets and enjoy spring time instead.”

“If things do escalate then this will have an impact of around 0.5 percentage points of global GDP and that would not be inconsiderable,” said Julian Mayo, chief investment strategist at investment management firm Fiera Capital.

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