China Retaliates— What it Means
Special Morning Rundown
Good morning. We will be off the desk today, but watching the markets. As such there will be no morning rundown video.
(This note was composed on a cell phone using voice recognition.)
JOBS DATA
Today is non-farm payrolls. We think anything less than 120,000 jobs would normally indicate a greater likelihood of a rate cut. Anything over 200,000 jobs added, would indicate definitely no chance of a rate cut anytime soon.
Given everything going on in the world globally, it’s hard to put a lot of emphasis on this data point. Powell has bigger fish to fry now which we get into in this note.
There is a quantifiable worst case scenario he must be looking at now.
LAST NIGHT
Here’s a summary of what happened last night and an outlook for today.
The world has begun retaliating, or negotiating, depending on how you look at it.
The most important event was the reciprocal retaliatory tariffs by China on the US.
Other nations have voiced concern and complaints, but so far this is about China’s reaction. Because as we’ve mentioned, this is only about China and the US.
DIVORCE
Another analogy that we use here continues to apply is: this is a global divorce and during a divorce even amicable ones arguments come up over who gets what? With trade partners caught in the middle of it all.
The problem with that is China’s actions will now not only tear at the US, but also actively seek to disrupt relationships to US has with its own satellites. The two main ones are Japan, and India.
Nations having significant trade with China, but ideological alignment with the US trading block are going to suffer.
Simply put, American allies that are geographic neighbors of China will start to feel pressure.
The newest news headlines are included here in pics. The ones using all capital letters are from official news agencies.
MARKETS
Markets are taking this poorly as everything is now moving in a very deflationary impulse.
Stocks are down, US bonds are much stronger, the USD is down, economic commodities continue to tumble and gold was down over $30 last night at present is down about $10. Thirty dollars either way in gold is noise, meaning there are some people who will sell (or buy) gold to cover margin issues in other assets that one should not care until a news item coincides with a move.
We wish we had a crystal ball, but unfortunately, we do not know how this will end in the short term.
FED RATE CUTS WHEN?
In fact, it may not end in the short term. It may just ebb and flow as tariffs and counter tires continue to pile up. An end so to speak, would be the two nations coming to the table and truly negotiating.