2018Feb

FC: US CLOSING REPORT: THURSDAY – 8TH – MARCH – 2018 March 08, 2018 at 10:20PM

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US cash equity markets closed higher after rallying on US President Trump’s signing of the steel and aluminium tariffs (DJIA +0.4%, S&P +0.5%, NASDAQ +0.4%). At the tariff signing, Trump said we will have a 25% tariff on foreign steel and a 10% tariff on foreign aluminium when the product comes across our borders, adding tariffs are a matter of necessity for national security. Trump stated for individual nations, the US remains open to modifying and removing tariffs, adding while negotiating NAFTA agreement, will hold off on steel and aluminium tariffs for Canada and Mexico. He also said tariffs are not in effect for another 15 days and added at some point, the US will be doing a reciprocal tax program. Staying with the tariff story, US Senator Flake said he will introduce legislation to nullify Trump’s tariffs. Meanwhile, the Mexican Economy Minister said he will not allow proposed tariffs to pressure NAFTA talks, adding they will not walk away from talks working assumption is that existing trade arrangements will stay in place over our current two-year projection horizon. In currency space, the US Dollar has gained against almost all of its G10 rivals today while the Euro is among the weakest after a choppy reaction to the ECB announcement. Since then, a sources story has said that internal staff calculations on the future path of monetary policy assume asset purchases totalling €30 Bln in the fourth-quarter. We also heard from Bank of Canada Deputy Governor Lane who said recent developments with respect to steel and aluminium, alongside increased protectionist rhetoric, carry potentially serious consequences, adding all that said, uncertainty about the North American Free Trade Agreement (NAFTA) and growing global trade tensions will need to be watched. Lane stated our range of possibilities is wide, which means that trying to quantify any scenario in advance would not be useful for monetary policy purposes. He said by moving gradually, we’ve been able to take in new data and conduct analysis on four key issues. First, when an economy is running close to full capacity. Second, inflation dynamics could be changing in the new economy Third, despite strong employment gains and an economy operating close to capacity, wage growth has been slower than would be expected. And, finally, with household debt at high levels. Lastly, the US economic picture still has upside potential; stronger business investment and household spending in the United States would likely benefit our economy. Oil prices ended lower with US crude futures settling at $60.12 (-$1.03).

Key Headlines/Data:

* The White House said President Trump to sign proclamations on steel and aluminium imports at 15:30 ET today.

* US President Trump said if a deal is reached with Canada and Mexico, it is unlikely they will be charged tariffs. He is looking at other countries as well with regards to tariffs and mentioned Australia.

* @AP BREAKING: AP sources: Trump tariffs on steel, aluminium to take effect in 15 days; Mexico and Canada exempted indefinitely:
• BREAKING: AP sources: All countries invited to negotiate exclusions from new US tariffs on steel, aluminium imports.

* Senator Flake said he will introduce legislation to nullify Trump’s tariffs

* US household net worth increased to $98.7 Tln in Q4; debt increased at an annual rate of +5.2% to $15.3 Tln

* Mexican Economy Minister said he will not allow proposed tariffs to pressure NAFTA talks, adding they will not walk away from talks

* Axios: President Trump’s spirit animal Peter Navarro is telling associates he wants Gary Cohn’s job as the president’s chief economic adviser.

* ECB Assumes Final QE Push Totaling 30 Billion Euros (Bloomberg)
• The European Central Bank’s internal staff calculations on the future path of monetary policy assume asset purchases totaling 30 billion euros ($37 billion) in the fourth quarter, according to euro-area officials familiar with the matter.
• The assumptions are technical and don’t constitute a pre-commitment on bond buying past September, when the current program is scheduled to end, the people said. At the same time, there’s broad agreement among Governing Council members that quantitative easing should probably come to a halt by the end of 2018, said the people, asking not to be identified because the deliberations are private.

* US crude futures settled at $60.12 (-$1.03)

* UK officials said to see no Brexit deal until next year.

* US House speaker Ryan says they will be starting the infrastructure bills in the next few weeks

* BoC Deputy Governor Lane:
• Recent developments with respect to steel and aluminium, alongside increased protectionist rhetoric, carry potentially serious consequences.
• All that said, uncertainty about the North American Free Trade Agreement (NAFTA) and growing global trade tensions will need to be watched.
• Our working assumption is that existing trade arrangements will stay in place over our current two-year projection horizon.
• The range of possibilities is wide, which means that trying to quantify any scenario in advance would not be useful for monetary policy purposes.
• The US tax reforms may further reduce the relative attractiveness of investing in Canada. For both these reasons, firms may decide to redirect some of their planned investment spending from Canada to the United States.
• The US economic picture still has upside potential; stronger business investment and household spending in the United States would likely benefit our economy.
• Underlying details suggest that the economy is progressing much as we thought it would.
• At the same time, the global outlook remains subject to considerable uncertainty.
• Non-energy goods exports could disappoint, given ongoing competitiveness challenges.
• As job creation has absorbed slack in the labour market, we have started to see wages pick up, last week’s strong investment figures are encouraging.
• By moving gradually, we’ve been able to take in new data and conduct analysis on four key issues. First, when an economy is running close to full capacity. Second, inflation dynamics could be changing in the new economy Third, despite strong employment gains and an economy operating close to capacity, wage growth has been slower than would be expected. And, finally, with household debt at high levels.
• It’s worth noting that household credit growth has been decelerating in recent months.
• And higher interest rates are also expected to dampen household spending.

* US President Trump speaks at tariff signing:
• We have to show cooperation and flexibility with friendly countries.
• No tax on products manufactured in the US and urges foreign companies to build plants in the US.
• We will have a 25% tariff on foreign steel and a 10% tariff on foreign aluminium when the product comes across our borders.
• Tariffs are a matter of necessity for national security.
• After tariff signing, Century Aluminium expects to expand.
• For individual nations, the US remains open to modifying and removing tariffs.
US is negotiating with China and does not know whether anything will come from it.
• While negotiating NAFTA agreement, will hold off on steel and aluminium tariffs for Canada and Mexico.
• Tariffs are not in effect for another 15 days.
• Exemptions on tariffs will be linked in part to military relationships.
• At some point, the US will be doing a reciprocal tax program.

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