US Closing Report 06 Apr 2018

US cash equity markets are nursing heavy declines at the closing bell having added to earlier losses this afternoon (DJIA -2.3%, S&P -2.2%, NASDAQ -2.3%).

US Closing Report(by Sigma Squawk)

The threat of a global trade war has spooked investors again today after US President Trump ordered the US Trade Representative to consider an additional $100 Bln of tariffs on China. The Chinese Commerce Ministry have since responded, saying that they will not hesitate to retaliate to the latest US measures. US government bond yields and the Dollar have also dropped today in response to the US jobs report where non-farm payrolls fell some way short of expectations at 103K (f/c. +190K).

The unemployment rate stuck at 4.1% (f/c. 4.0%) while average hourly earnings were a touch stronger month-on-month at +0.3% (f/c. +0.2%). Comments from Fed Chair Jerome Powell meanwhile were largely ignored as he advocated a gradual pace of rate increases going forward. He did also note that inflation should move up notably this spring. Elsewhere, oil prices have moved lower with US crude futures settling at $62.06 (-$1.08).

Key Headlines/Data:

* New York Fed GDP Nowcast (Q1) revised higher to 2.77% from 2.71%; Q2 nudged up to 2.91% from 2.87%

* White House adviser Kudlow told reporters he only found out about the latest proposed tariffs on China on Thursday night.

* White House adviser Kudlow said he hopes the US will not have to use tariffs but they may. He also said he believes a solution to the trade dispute is possible within three months but tariffs are not a bluff.

* Senior Mexican Economy Ministry Official said he is very convinced that a new NAFTA agreement will be made soon.

* Baker Hughes: US oil rigs rise by 11 to 808

* US Treasury Secretary Mnuchin:
– Their objective is still not to have a trade war with China.
– They are willing to enter negotiations with China but Trump is also prepared to           defend US interests.
– They can manage the impact of Chinese tariffs on the US economy without much         damage.
– China has agreed that reducing the trade surplus with the US is important.
– There is the potential for a trade war with China.
– The US is making progress in NAFTA talks.

* Fed Chair Jerome Powell speaks:
– My FOMC colleagues and I believe that, as long as the economy continues broadly  on its current path, further gradual increases in the federal funds rate will best promote these goals.

– The FOMC sees the risks to the economic outlook as roughly balanced.
– Since monetary policy affects the economy with a lag, waiting until inflation and employment hit our goals before reducing policy support could have led to a rise in inflation to unwelcome levels. In such circumstances, monetary policy might need to tighten abruptly, which could disrupt the economy or even trigger a recession.

– In fact, monthly inflation readings have been firmer over the past several months, and the 12-month change should move up notably this spring as last spring’s soft readings drop out of the 12-month calculation.

* U.S. Looks to Protect Domestic Car Makers From Foreign Competition (WSJ):
– The Trump administration is pursuing ways to protect domestic vehicle manufacturing by forcing imported cars to meet stricter environmental rules when entering the country, according to senior administration and industry officials, a move that would make imports more expensive.

* US crude oil futures settled at $62.06 (-$1.08) | Brent crude futures settled at $67.11 (-$1.22).

* US Consumer Credit (Feb) $10.6 Bln versus $15.0 Bln expected, previous $13.9 Bln revised to $15.6 Bln.

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