Week of June 1 2018 Weekly Recap & The Week Ahead
Monday, June 4th, 2018“The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.” – George Soros
1. Euro, Yield Worries Amid Turmoil in Italy — Italy’s anti-establishment parties have abandoned plans to form a coalition government after the country’s president refused to accept a controversial choice for economy minister, raising the possibility of snap polls. Investors fear the election will resemble a referendum on the EU and the euro, posing an existential threat for the bloc. That sparked the currency to slip below the $1.16 level, while the gap between Italian and German 10-year bond yields widened to its highest in over four years, putting pressure on banks and stocks across the region.
2. U.S. Moves Forward with China Tariffs — the White House is proceeding with its proposal to impose 25% tariffs on $50B worth of goods from China, and place new limits on Chinese investments in U.S. high-tech industries. “This statement is obviously in violation of the consensus reached in Washington recently by both China and the U.S,” China’s Commerce Ministry declared, pointing to the “trade war hold” announced by Treasury Secretary Steven Mnuchin less than 10 days ago.
3. US Allies Strike Back Against U.S. Tariffs — besides retaliatory tariffs from the European Union, the U.S. is facing “counter-balancing measures” from its northern (Canada) and southern neighbors (Mexico) after imposing duties on steel and aluminum. Canada’s levies will cover C$16.6B in imports, including whiskey, orange juice and other food products, alongside metal tariffs. Mexico’s reciprocal measures will also target steel, as well as pork legs, apples, grapes and cheeses.
4. China A-shares Join MSCI Indexes — more than 230 Chinese stocks, known as A-shares, have been finally added to MSCI’s Emerging Markets Index (ETF: EEM), giving ordinary U.S. investors greater access to mainland China. The move is expected to drive a surge of foreign money into local markets.
The week ahead — Economic data from Econoday.com: