Days ago the Us government-imposed 10% tariffs on china imported goods as this increased the tense of the war between these 2 big nations. Last week, crude oil prices succumbed amid US-China trade war escalation. The WTI benchmark touched the lowest level in seven months after Beijing retaliated with currency depreciation and a ban on US agricultural imports to a threat from Donald Trump. The US President moved to expand tariffs to an additional $300 billion in Chinese imports – covering nearly all bilateral trade – starting September 1.
US CPI DATA MAY COOL FED RATE CUT
The Federal Reserve may not be nearly as ready for another rate cut in September as the markets now presume. The priced-in outlook implies certainty in another 25bps reduction and a formidable 33 percent chance of a 50bps one.
Such exuberance is pointedly absent from recent comments by even very dovish FOMC committee members, like St Louis Fed President James Bullard. Inflation figures that endorse a more circumspect approach and force investors to trim stimulus bets would be unwelcome amid growing global slowdown fears, especially if they are endorsed by soft results on bellwether GDP readings from Germany and Singapore.
CHINESE DATA AND OPEC
The week is not entirely without potential bright spots. The recent improvement in Chinese economic data outcomes relative to baseline forecasts opens the door for upside surprises on incoming industrial production and retail sales statistics. That might lift investors’ spirits somewhat, but a single month’s results probably won’t offset macro headwinds gathering steam since early 2018 in a lasting way. However, it seems unlikely that Riyadh and its OPEC+ allies can convince the markets that they are able to provide sustainable support even as demand prospects wither.