Stocks are dipping as Trump’s ‘meddling’ fuels market anxiety

  • US futures and European stocks are slipping. 
  • “Trump’s meddling is almost single-handedly driving the markets right now,”says Jasper Lawler of London Capital Group.
  • “The president’s almost haphazard approach, of sounding optimistic over trade talks before turning confrontational, is creating high levels of uncertainty and volatility,” he said.

European equities and US futures dipped on Thursday as anxious investors reacted to US President Donald Trump’s capricious trade rhetoric as well as disappointing economic data.

Traders remain uncertain of the potential for a US-China trade agreement, after Trump claimed the Asian nation “broke the deal” and hiked tariffs on $200 billion worth of Chinese imports last week, then downplayed the dispute as a “little squabble” and said a deal “could absolutely happen” after China retaliated with duties on $60 billion of US goods this week.

The president has also imposed sanctions on Chinese telecom titan Huawei, but signaled he might delay tariffs on automobiles for six months. 

“Trump’s meddling is almost single-handedly driving the markets right now,” said Jasper Lawler, head of research at London Capital Group.

“The president’s almost haphazard approach, of sounding optimistic over trade talks before turning confrontational, is creating high levels of uncertainty and volatility.”

Market sentiment wasn’t helped by a 0.2% dip in US retail sales in April — a sharp reversal from 1.7% growth in March — as Americans spent less on cars, clothing, electronics, and appliances. The disappointing data came after China reported slower growth in retail sales and industrial production.

As geopolitical concerns jostle with a strong labor market and recent stock-market gains in people’s minds, “the US consumer is not willing to spend more,” said Konstantinos Anthis, head of research at ADSS.

“This could become a self-fulfilling prophecy: lower spending leads to fewer sales, meaning less growth in the economy and potentially more layoffs from companies in the US, which could eventually lead towards recession.”

Here’s the market roundup as of 9.54 am (4.54 a.m. ET):

  • European equities drifted lower. The Euro Stoxx 50 and Germany’s DAX slid 0.2%, while Britain’s FTSE 100 dipped 0.1%.
  • Asian indexes were mixed with the Shanghai Composite up 0.6%, Japan’s Nikkei down 0.6%, and Hong Kong’s Hang Seng almost flat.
  • US stocks could fall after the open. The futures underlying the Dow Jones Industrial Average and S&P 500 were marginally down, and the Nasdaq was down 0.1%.
  • Oil prices have rallied with Brent and WTI crude both up about 0.8%.

Trump ramps up tariffs on China, escalating the high-stakes trade war

President Donald Trump more than doubled the tariff rate on more than a third of Chinese imports early Friday morning.Beginning at 12:01 a.m. ET, a total of about $250 billion worth of shipments from China will face an import tax of 25%. The escalation has cast doubt on trade negotiations and is expected to lead to higher prices for American businesses          and consumers.    
President Donald Trump on Friday more than doubled the tariff rate on roughly $200 billion worth of Chinese imports, a move that sets the stage for retaliation from Beijing and that significantly raises the stakes in a yearlong trade war between the world’s largest economies.
After accusing China of reneging on past trade commitments, the Trump administration has sought to increase pressure on Chinese officials in negotiations taking place this week. About $250 billion worth of Chinese products will now face a 25% duty when shipped to the US. Previously, a majority of those had been subject to a 10% import tax.
That could lead to higher prices on a wide range of everyday products from electronics to clothing. While Trump claims Chinese companies will pay the price, research suggests American businesses and consumers bear the brunt of tariffs.
Officials at the Chinese Commerce Ministry — who have denied that they made reversals on major aspects of a draft trade agreement — vowed on Wednesday to take countermeasures against increased tariff rates.
Those could include tariffs on American products or other trade barriers. China has already placed retaliatory duties on $110 billion worth of imports from the US, which had caused significant trouble for the US agricultural sector.

The escalation comes just as officials were thought to be nearing a deal. As recently as last week, there were high hopes for the two days of trade negotiations in Washington that began on Thursday.
While both countries have indicated a trade deal is still possible, questions have been raised about the timeline of and the ability to enforce an agreement.
“China can be made to fold, but it would require much more sustained action than the US has taken to now,” said Derek Scissors, a resident scholar at the conservative-leaning American Enterprise Institute. “More likely, China does not fold and smaller-scale US action becomes permanent.”
Trump on Monday also threatened to slap steep tariffs on all remaining Chinese imports, roughly $325 billion worth, a move that economists warn would have widespread effects on businesses and consumers.
“New tariffs on those goods that president has so far left untaxed will fall on American families, as these mostly hit textiles, apparel, shoes, home goods, etc.,” said Mary Lovely, a trade scholar at the Peterson Institute for International Economics.
“Higher taxes on these goods are likely to be highly regressive, in that lower and middle class Americans spend a higher portion of their income on these Chinese imports than do higher income Americans,” she continued. 

China Inflation At 6-month High; Credit Growth Slows

China’s consumer price inflation rose to a six-month high in April, and producer price inflation increased more-than-expected at the fastest pace in four months, data from the National Bureau of Statistics revealed on Thursday.

The consumer price index rose 2.5 percent year-on-year in April, following a 2.3 percent increase in March, in line with economists’ expectations. The latest inflation was the highest since last October.

The food price index climbed 6.1 percent annually in April, following a 4.1 percent rise in the preceding month. Food price inflation was driven higher mostly by disruptions to pork supply caused by the African swine flu.

On a monthly basis, consumer prices edged up 0.1 percent in April, after a 0.4 percent fall in the previous month.

Separate data from the National Bureau of Statistics showed that the producer price index rose 0.9 percent yearly in April, following a 0.4 percent increase in March. Economists had forecast a 0.6 percent rise.

On a month-on-month basis, producer prices rose 0.3 percent in April.

“The upshot is that supply-side factors appear to have pushed up both CPI and PPI last month,” Capital Economics economist Julian Evans-Pritchard said.

“But with core CPI moving in the opposite direction, there are still few signs of a demand-driven pick-up in inflationary pressures.”

Capital Economics do not expect further upside to PPI and non-food CPI as economic growth is unlikely to stage a strong recovery and industrial commodity prices are likely to drop back before long.

Elsewhere on Thursday, data from the central bank showed that new yuan loans given by Chinese banks totaled CNY 1.02 trillion in April, which was well below analysts’ expectations, and March’s CNY 1.69 trillion.

The broad money supply measure of M2 grew 8.5 percent year-on-year in April, which slower than the 8.6 percent growth in March.