3 June 2019
Bassanese Bites: RBA and GDP ahead – Week beginning: 03 June 2019
Global trade tensions continued to dominate market sentiment over the past week, with bond yields and equities prices dropping further. Oil prices also fell while currencies remained steady and gold benefited from a flight to safety. Iron-ore also continued to impress, despite the trade wars.
The focus of market attention last week was again US President Trump – in particular, his comment that he’s “not ready” to conclude a trade deal with China, and his decision to threaten new tariffs on Mexico due to the illegal immigration problem. As regards China, markets are now focused on whether the two leaders can at least agree to meet at the G-20 Summit later this month, and are also worried about any new retaliatory measures China may have in store. As for the Mexicans, they seem keen to meet quickly and hopefully deal with Trump’s concerns.
The safety valve for all this tension is the bond market, where traders are now confidently expecting Fed rate cuts later this year if the trade war lingers on. Supporting this hope were comments from Fed vice-chair Clarida, who suggested the Fed could be open to lower rates if growth slowed and/or inflation remained stubbornly low. The Fed has got Trump’s back!
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