Tough week at the office as trade tensions continued to simmer, with a new front (re)opened Friday with threats against Mexico. With that the S&P 500 closed below the 200 day moving average at week’s end.
First, as to our friends in China:
Chinese state media reports underlined the country’s scope to use rare-earth minerals, used in the production of an array of devices such as mobile phones, computer memory chips and rechargeable batteries, as an economic weapon.
Second, over to Mexico:
Trump announced in a tweet that the U.S. would impose a 5% tariff on all goods from Mexico until that country stops the flow of illegal immigrants into the country. He said the tariffs will rise to 10% on July 1 if the crisis persists, and by another 5% for every successive month, up to 25% by Oct. 1.
“Tariffs will permanently remain at the 25% level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory,” Trump said.
That would be a disaster for the auto industry.
And then back to China Friday:
Stocks were also battered after a tweet from Hu Xijin, the widely followed editor of the Global Times, indicated that China will hit back hard at the U.S. “Based on what I know, China will take major retaliative measures against the U.S. placing Huawei and other Chinese companies on Entity List. This move indicates Beijing won’t wait passively and more countermeasures will follow,” the editor tweeted. Global Times is a Chinese state-owned tabloid that is watched for clues to government policy stances.
Not much to report on the economic front but April personal incomes rose 0.5%, while consumer spending rose 0.3%.
We highlighted both the 10 year bond AND oil in last week’s recap. Both had sharp drops this week yet again so worth showing them once more. That “inversion yield curve leading to recession” talk should continue to heat up.Continue reading