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Good morning. Markets are licking their wounds after a rough day, trade war tensions are showing no signs of abating and Theresa May’s day of departure may be announced. Here’s what’s moving markets.
Carnage
Things got ugly Thursday as markets digested concerns around the trade war, Federal Reserve policy and the economic growth outlook. U.S. 10-year Treasury yields hit the lowest since 2017, Goldman Sachs Inc. is cautiously advising buying the dip in beaten-up commodities and traders are shorting the S&P 500 at a rate not seen since 2015. Traders now seem to be awaiting something comforting to take the edge off from President Donald Trump, but nothing’s been forthcoming yet. European stock futures are at least pointing to a small recovery on Friday morning.
Weaponizing Exports
On the trade front, there is little sign of tensions abating on the Chinese side, and for the U.S. the next step would appear to be weaponizing American exports, a huge threat. Meanwhile, Trump has laid out an aid package for farmers taking a hit from the tariffs. At the Fed, after the message of policy patience this week there are indications it’s losing faith in its inflation target, and the Cleveland Fed's Loretta Mester says cutting rates would be a bad idea.
Leaving
Prime Minister Theresa May is still holding on and is hinting that her departure, while assured, may not happen as soon as some had been anticipating. The timetable is, however, set to be announced on Friday. The pound has been hit hard as the uncertainty increases, ministers flee and various members of May’s Conservative Party jostle for position to replace her. The front-runner, Boris Johnson, is particularly seen as a threat to the health of sterling. The worries can be seen clearly in the yield curve, which is at the flattest level since the financial crisis.
Deutsche’s Woes
Deutsche Bank AG is having yet another difficult week. Shares in the embattled lender hit a record low ahead of what turned out to be an acrimonious board meeting at which Chairman Paul Achleitner took the brunt of the backlash from investors complaining about the group’s dismal performance. It intends to once more take the hatchet to its investment bank to make “tough cutbacks” in an attempt to restore market confidence following the breakdown of merger talks with Commerzbank AG.
Coming up...
Asian stocks were mixed and remain on track for a third week of losses as investors continued to digest headlines around the trade war. Crude oil had its worst day of the year so far on Thursday and is headed for its biggest weekly drop of 2019. U.K. retail sales data is due and it’s a quiet day for earnings. Most notable is Danish shipping giant AP Moller-Maersk A/S, a good bellwether for the state of global trade.
What We’ve Been Reading
This is what’s caught our eye in the past 24 hours.
- The wealth detective who finds the hidden money of the super rich.
- This software behemoth is run on one man’s gut.
- Trump’s tariffs are hitting Spanish olives.
- Japan’s 75-year-old job hunters.
- Google’s “trashy video” AI is cleaning up your YouTube page.
- The man trying to take down Airbnb.
- Did Leonardo da Vinci have ADHD?
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To contact the author of this story: Sam Unsted in London at sunsted@bloomberg.net
To contact the editor responsible for this story: Tom Lavell at tlavell@bloomberg.net
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