General Macro Data & events
• Lira takes a hit as America’s decides to freeze the assets of two prominent Turkish ministers of justice. The sanctions were in response to the detention of Andrew Brunson (a US pastor), who is being tried red-hot inflation and other imbalances that have left the lira down by 25 per cent for the year to date.
• The US doubled steel and aluminium tariffs to Turkey, bringing to a head an economic crisis that had been brewing for months. Turley has retaliated by raising taxes on US alcohol to 140 per cent, cars to 120 per cent and leaf tobacco to 60 per cent. Tariffs were also doubled on cosmetics, rice and coal.
The current debate over tariffs and protectionism has led to a clear deterioration in export expectations in the on terrorism and espionage charges. This was another blow for a country that was already reeling from Eurozone. Growth slowed again in 2Q to 0.3 per cent, from 0.4 per cent in the opening three months and 0.7 per cent at the end of last year. This is despite the truce between US president Donald Trump and European Commission president Jean-Claude Juncker.
• China has said it will impose new tariffs on $60bn worth of imports from the US, including aircraft and liquefied natural gas, in a rapid riposte to Donald Trump’s latest threat to raise US levies on Chinese goods. Those tariffs could take effect next month.
• Chinese inflation beats expectations in July
• Since the US introduced the first round of tariffs on imports from China on July 6, core consumer prices in the US rose by their quickest pace in a decade in July (2.4%) and topped market forecasts – keeping the Federal Reserve on track to raise interest rates twice more this year.
The data add to a robust picture of the US economy, which grew by a speedy annual rate of 4.1 per cent in the June quarter. The unemployment rate is close to its lowest level in 18 years.
• US yields have fallen as pressure has intensified in emerging markets, driving investors into have assets such as US treasuries. This has also been in response to tariff wars between the US and China/Turkey which sent US stock markets down.
Brexit and the UK
• BOE raise interest rate to 0.75% over strong recent economic data – the highest level since the financial crisis and amidst good economic growth, low unemployment rates and steady growth in real wages. This move was met with a level of hostility by several economists, noting that the UK economy is still fragile, there is still significant uncertainty around Brexit and ongoing market volatility as a result of trade wars.
• US, Asian and European equity markets suffered a broad sell-off on Thursday after China threatened “counter-measures” should the US escalate the trade war by sharply raising tariffs on more than $200bn of imports from 10% to 25%.
• Activity in Britain’s service sector slipped to a three-month low in July as a closely watched survey of economic sentiment came in below City economist’s forecasts.
• The pound was the worst performing major currency against the dollar over the past month, as anxiety over whether Britain will leave the EU next year without a deal becomes the key driver of sentiment. The UK currency fell to its lowest level in 11 months on Monday, as UK trade secretary Liam Fox warned there was a 60-40 chance the UK would exit the EU in March without agreement and funds raised their bets against the currency.
• GDP growth increased to 0.4% in Q2, up 0.2% from Q1. While the services sector expanded 0.5 per cent during the quarter and construction by 0.9 per cent, manufacturing contracted 0.9 per cent. This was the second consecutive quarterly decline in manufacturing. Services account for 80 per cent of the economy, construction for 6 per cent and manufacturing for 10 per cent, the remainder includes agriculture, oil and gas and utilities.
• The FTSE 100 suffered losses as slowing Chinese growth, the rising safe haven appeal of the dollar, trade war worries and an emerging markets wobble send copper prices crashing and combined to send the blue chip index sliding to a four-month low. Together with falling oil prices, this sent the stocks of large commodity giants that dominate the index lower.
Brent Crude Oil
Oil prices have fallen as;
• China reported July crude oil imports showing shipments are at the third-lowest level this year.
• China threatened to retaliate against U.S. tariffs by slapping additional import duties of 25 percent on $16 billion worth of American goods. This has caused uncertainty over the global demand for crude oil.
• U.S. crude stocks fell by 1.4 million barrels last week, according to the Energy Information Administration.
Oil prices have regained as ;
• Worries about disruptions to supply from Libya, a labour dispute in Norway and unrest in Iraq had all combined to push prices sharply higher at the end of last week.
• A new round of sanctions that could come into force in three months could put an end to Russian crude oil and oil product exports to the United States
• U.S. sanctions on Iranian goods went into effect, intensifying concerns that sanctions on Iranian oil, expected in November, could cause supply shortages.
Gold prices have fallen to its lowest point in 18 months as a rising dollar outweighed concerns about political uncertainty and economic woes in Turkey that rattled emerging markets. While political and economic uncertainty often attracts risk-averse traders to gold, the strength in the U.S. dollar limited demand for the precious metal.
Gold has performed poorly as interest rates and the US dollar have risen this year, since it offers no yield and is more commonly bought as a “safe haven” when the greenback’s value is falling.