US bourses ended the session in the red. Stocks had opened to the upside but reversed course, along with the Greenback, after news broke that Rex Tillerson had been replaced as the Secretary of State by former FBI Director Mike Pompeo. We later learned that the Under Secretary of State Steve Goldstein is being fired for contradicting the account of Rex Tillerson’s dismissal. In later remarks, Tillerson said the campaign of maximum pressure against North Korea has succeeded beyond expectations, adding he has achieved cease-fires in Syria that prevented loss of life but much more needs to be done. Tillerson stated there is much work to do to establish a clear relationship with China, adding if Russia continues on its current path it will become increasingly isolated. In fixed, Treasuries closed higher after a fairly dull US CPI report – headline CPI was in line at +2.2% YoY, as was the core rate at +1.8%. There was also minimal reaction to the US $13.0 Bln 30-year bond sale that stopped through 0.5 basis points to 3.109%. Elsewhere, the Loonie was the laggard among the G10’s after relatively dovish remarks from Bank of Canada Governor Poloz who said Canada may be able to achieve “more economic growth without . . . generating higher inflation”. In energy space, US crude futures settled at $60.71 (-$0.65). Oil prices made slight gains in post-settlement trade after private inventory data showed a smaller than expected build in crude inventories and draw in distillates. In other news, the draft G20 communique said one risk to outlook on the global economy is a retreat to inward looking policies.
Following the US close, a US Senior Administration Official says in the very near future, new tariffs on China are expected, adding tariffs aimed at tech and IP, could cover more than 100 products but the final number is unknown. Meanwhile, a source who has discussed the matter with the White House cites that the Trump administration is looking to impose tariffs on $60 Bln of goods from China.
Ahead of the Asian open, RBA Assistant Governor Kent said indeed, accommodative monetary policies have encouraged greater risk-taking by both lenders and borrowers, adding this is one of the important ways in which the monetary transmission mechanism works. In the Q&A that followed, he said there is no reason why moves from the RBA have to be in 25bp increments, adding current good economic growth raises the risk of a pickup in pressures on the CPI. Lastly, markets could be under-pricing risk of faster global growth. Data wise, New Zealand’s BoP current account balance logged a larger than expected deficit of NZ$2.77 Bln (f/c -NZ$2.45 Bln) in Q4, while Australia’s Westpac consumer confidence rose 0.2% m/m in March.
Looking ahead, we get China’s industrial production, retail sales and fixed asset investment. We also get Japanese core machine orders. Also of note, we get the BoJ January meeting minutes.