Tariffs on EU goods; May requests extension on Brexit; Oil prices continue to rally.

9 April 2019

Tariffs on EU goods; May requests extension on Brexit; Oil prices continue to rally.

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Market news

The White House has threatened to impose tariffs on a host of EU goods in retaliation for European aircraft subsidies which it claims is harming Boeing, the US-based aerospace company. Olive oil, wine and helicopters are amongst the items on the list proposed by the United States Trade Representative.
 
Last night’s news undermines the positive sentiment that has grown over the past week, which has seen investors become more optimistic about Washington’s protracted trade negotiations with China. It is now more plausible that the US could be involved in unfriendly negotiations with two of its largest trading partners simultaneously.
 
Nevertheless, upbeat US economic data has helped lift global stock markets since last week. A stronger than expected jobs report kept American unemployment at its historic low of 3.8%, while wage growth registered 3.2% compared to last year. The Institute for Supply Management’s manufacturing index rebounded, signalling a higher rate of expansion, but the equivalent index for the US service sector fell to the slowest pace since 2017.
 
German industrial data disappointed in February, adding to growing evidence that first quarter growth for Europe’s largest economy will be meagre. The Euro Stoxx 600 rose 2.5% last week, however, as did the FTSE 100, both helped by a perceived increase in the chances of a soft Brexit. Increased appetite for riskier assets also pushed yields on Gilts and German Bunds higher.
 
Still without an agreement in parliament, Theresa May has asked for a further Brexit extension. The government’s request is for June 30th, but it is expected that the EU will demand a much longer period that could stretch into next year. Further conditions may also prevent the UK from disrupting any EU decisions in the meantime.
 
Finally, oil prices have continued to rally, taking Brent crude oil above $71 per barrel for the first time since November last year. US inventories rose but overall supply is expected to be squeezed further by OPEC’s restrictions and country-specific sanctions.

 

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Tariffs on EU goods; May requests extension on Brexit; Oil prices continue to rally.

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