Monday, 5 March 2018

Market Trends (Trade War Looming?)

MARKET TRENDS (5th March 18)
Important Economic Announcements for the week:
Tues: RBA Interest Rate Decision 1130 am
Wed: Eur GDP 6 pm BOC Interest Rate Decision 11 pm
Thurs: ECB Interest Rate Decision 8.45 pm
Fri: BOJ Interest Rate Decision 12 pm US Non-farm Payroll 9.30 pm
Short Thoughts
This will be an event packed week ahead with 4 central banks announcing their interest rate movements.
Here We Go Again! Trump has announced the US intends to put up tariffs on steel and aluminium with the “US National Security”  highlighted as a concern. It could spark a trade war whereby Europe is looking at tariffs on US bikes, apparel and whiskey. The US has already put up similar protectionist measures for the car, solar and washing machine industries. It might just end up to be a zero-sum negative gameplay whereby it will stroke inflation as prices are being driven up due to such policies. It might save jobs but from the bigger picture, more jobs could be lost trying to defend an uncompetitive industry. So it is akin to saving a bunch of trees but leaving the whole forest vulnerable.
Historically, we have two big scale trade wars situation whereby one was in the 1930s (Great Depression Period) and the other in 1960s (Ignited by the Chicken Tax). From these trade wars, it did not really aid things and they were blamed for the drag in recovery for the Great Depression. I believe the US would be losing a fair amount of political goodwill as the Big Brother and China could emerge stronger after Trump’s presidency.
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