Capital Markets: Trying to Stabilize

From Marc to Market:

Overview: It is taking investors a bit more than two sessions to find its footing after being the unexpected end of the tariff truce between the US and China struck last December. Asia Pacific equities tumbled after the S&P 500 shed nearly 1.7% yesterday, the third largest decline in 2019, but Europe's Dow Jones Stoxx 600 is consolidating near yesterday's lows. Germany reported an unexpected rise in industrial production, and it appears to be lending support to the DAX. US shares are little changed. European core bonds yields are steady to firmer, while peripheral bond yields are off two-three basis points. The 25 bp rate cut by the Reserve Bank of New Zealand (putting the cash rate at a record low (1.5%), was widely anticipated, and although it had little impact in the debt market, the New Zealand dollar was sold. The Kiwi joins sterling in being the underperformers today. The cross-party talks do not appear to be making much progress and pressure on May to step down is building. The other major currencies are straddling unchanged levels. The South African rand is the strongest among emerging market currencies as the country goes to the polls. The issue is ANC's victory margin. If it garners 60% or more of the vote President Ramaphosa will be in a stronger position.

Asia Pacific
China is proceeding with the trade talks with the US despite the fact it faces a US tariff increase in the middle of the two-day negotiations. Assuming that the US does indeed lift the tariff on $200 bln of Chinese goods to 25% from 10% before Friday's negotiations, it ought not to be surprising if China also retaliates with its tariffs. Some see China pressing on with the talks as being conciliatory, but are unlikely to call the US being conciliatory if it continues to negotiate in the face of Chinese tariff increases. In a domestic dispute with American football players, the Trump Administration staged a couple of "impromptu" protests of their own. The speed at which a team with little experience in negotiating with China took offense and retaliated almost viscerally could itself be a tactic that the hardline camp was looking for an opportunity to deploy. Less than a week ago, press reports were playing up the likelihood of an agreement by the end of this week. Moreover, the US negotiators, who have been so critical of their predecessors, seem to have only belatedly come around to realize that a broad change in China's industrial policy and other structural issues will not be forced on the PRC in these trade talks....

...America
The S&P 500 gapped higher on April 1 and did not look back before reaching record highs on May 1. That gap is unfilled and may be important to the near-term outlook. That gap is found between 2836 and 2848.6. Yesterday's low was 2862.6. On the upside, 2915-2920 area may be key. It houses the 20-day moving average and retracement targets of the recent setback....

....MUCH  MORE