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THE DAILY MACRO BRIEF: Customs taxes, Treasury bills, Fed rates, US/China tensions, ECB...

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05/16/2019 | 08:34am EDT

It would seem that Trump is in favor of postponing the surtax on the European automotive sector. The number one creditor in the United States has reduced its holdings of Treasury bills. Regarding the reduction of rates in the US, the speeches do not agree with the probabilities. The ECB denounces commercial tensions.

A break for the EU. The US Secretary of Commerce had submitted to Europe last February a report on the automotive industry in which a tax increase (from 2.5% to 25%) on vehicles imported into the United States was envisaged. Yesterday, rumors circulated that this possible surtax would be postponed for six months. The White House still needs to formalize the decision, which could take place on Saturday.

Slightly but surely. According to ICT (US Treasury Department) data, China, which is the largest holder of US debt, reduced its holdings of Treasury bills in March. They amounted to $1,120.5 billion, compared to $1187.7 billion a year earlier, a decrease of $67.2 billion.

Trump is throwing fuel on the fire. In order to maintain its image as a leader and not to miss the new economic and political challenges, the United States has decided to limit the use of foreign equipment in telecom infrastructures. This decision further heightens tensions with China by forcing the Chinese giants Huawei and ZTE out of the US market.

Fed rates are more and more likely to fall. They may say that a decline in rates is not expected (T. Barkin, E. George, ...), but the CME Group FedWatch barometer indicates the opposite. With Sino-American trade tensions and mixed macroeconomic statistics, the likelihood of the Fed lowering rates at the end of the year has increased in recent weeks.

In the meantime, at the ECB. Peter Praet, Chief Economist at the ECB, said yesterday in Brussels that economic policy uncertainty in the euro area is high. His colleague, Benoît Coeuré, stated in an intervention in the National Assembly that the ECB was ready to adjust its monetary policy instruments if necessary, so that inflation would approach the target of a price increase close to but below 2%. It considers that "the persistence of uncertainties related to geopolitical developments, the threat of protectionism and vulnerabilities in emerging markets weigh on the economic climate".

Switzerland is getting active. President Ueli Maurer of the Swiss Confederation is travelling to Washington on Thursday to meet his American counterpart and discuss a possible free trade agreement. At the same time, Switzerland and the United Kingdom want to ensure the continuation of their trade relations once they leave the EU.

Economic statistics today. Building permits, the Philadelphia Fed Manufacturing Index, housing starts and weekly unemployment registrations will be unveiled this afternoon, ahead of Brainard's (member of the Fed Governing Council) speech and the publication of the Treasury Department's semi-annual report.
Stocks mentioned in the article
ChangeLast1st jan.
GET HOLDINGS LTD 16.67% 0.49 End-of-day quote.22.50%

Romain Fournier
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