US bourses rebounded on Friday afternoon ending the session mostly higher, after falling at the open on the proposed US import tariffs from the Trump administration. It was reported, according to sources, that the EU are considering applying a 25% tariff on around $3.5 Bln of imports if the US tariff plan goes ahead. Meanwhile, the IMF said US import restrictions on steel and aluminium is likely to cause damage not only outside the US, but also to its own economy, adding steel and aluminium tariffs announced recently by Trump are likely to damage to the US economy, including construction and manufacturing sectors. The Mexican Chief NAFTA Negotiator said he thinks Mexico and Canada should excluded from US tariffs on steel, adding Mexico, US and Canada are in a position to leave NAFTA talks. In fixed, investors seemed to be focused on the possible inflationary impact with US yields higher. The US Dollar index dipped below 90 earlier in the session, while the Japanese Yen remains the outperformer among the G10’s after Kuroda hinted they could think about an exit from easy monetary policy in fiscal 2019. Elsewhere, US crude oil futures settled at $61.25 (+$0.26) after the Baker Hughes rig count rose by 1 to 800.
Over the weekend, Germany’s SPD members voted in favour of coalition deal with Merkel’s CDU/CSU with a vote of 66.02%. On US steel tariffs, a spokesman for China’s NPC said China does not want a trade war with the US. Meanwhile, the WSJ reported that there will be no exemptions to the US steel tariff. Minneapolis Fed Governor Kashkari said he is nervous about cost to economy of sending tough message to China.
Ahead of the Asian open, Australia’s AiG performance of services index fell to 54.0 in January, while the CBA services PMI rose to 54.2 and composite PMI up to 54.3. In Europe, exit polls in Italy suggested that the result will be a hung parliament.
Looking ahead, we get China’s Caixin services PMI and New Zealand Treasury economic indicators.