Week of June 22 2018 Weekly Recap & The Week Ahead
“If you personalize losses, you can’t trade.” — Bruce Kovner
1. Trump Directs More Tariffs at China — Trump asked the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs, at a rate of 10 percent. If China “refuses to change its practices” and insists on continuing with the new tariffs it recently declared, then the additional levies would be imposed on Beijing. However, the Chinese Commerce Ministry issued a response, stating that the latest threat of more tariffs violates previous negotiations and consensus reached between both the U.S. and China. Furthermore, President Trump has threatened a further $200B in tariffs on Chinese products should Beijing hit back again, bringing to $450B the potential amount that could be targeted. That sum approaches the roughly $500B in total annual Chinese exports to the U.S. As the trade war unfolds, the Trump administration is also working on measures that protect agriculture and other critical industries from retaliatory tariffs being threatened by China.
2. New York Sues 3M Over Toxic Foam — New York state is going after 3M (NYSE:MMM) and five other manufacturers for the almost $39M the government has spent to protect residents from the toxic firefighting foams made by the companies. Their use at five military and civilian airports in the state caused “extensive contamination” to nearby fish, soil and water, and increased the risk to people of immune system damage and other health problems.
3. China Threatens to Strike Dow-Listed Firms — China’s state-controlled Global Times reported that “If Trump continues to escalate trade tensions with China, we cannot rule out the possibility that China will strike back by adopting a hard-line approach targeting Dow Jones index giants,”. “Beijing will further open up China’s financial markets to the world, a move that may draw funds from U.S. stock markets as global investors increasingly add Chinese stocks to their portfolios.”
4. Dow Jones Removes GE from Index — the Dow Jones Index dropped GE and replaced with Walgreens (NASDAQ:WBA). GE released a statement saying that “Today’s announcement does nothing to change those commitments or our focus in creating a stronger, simpler GE.” The industrial conglomerate has been the worst performing stock in the index – where it was an original member in 1896 and a member continuously since 1907 – falling 55% over the last 12 months, and more than 25% YTD.
5. OPEC Ministers Agree to Raise Oil Production by 1 Million Barrels a Day — OPEC members agreed to start pumping more oil, though the agreement will not end the group’s 18-month-old deal to limit output. Instead the producers are seeking to cut no deeper than 1.2 million bpd, the target they set in November 2016. Expecting a large oil deficit in the second half of this year – due to outages in Venezuela and Libya – as well as calls from top consumers to cool down prices, consensus among the group is to raise production by a combined 1M barrels per day.
The week ahead — Economic data from Econoday.com:
