Stock futures flat as auto tariff threat dulls Fed optimism

Global Stock Markets

Worries over U.S. trade protectionism, this time around car imports, weighed on Wall Street’s main indexes on Thursday, overshadowing optimism that the Federal Reserve may be more tolerant of rising inflation than previously expected.

The Trump administration launched a national security probe into car and truck imports that could lead to new tariffs, with Beijing calling the move an “abuse” of national security clauses and saying it would defend its interests.

The decision added to jitters over trade negotiations, reignited after Trump called for “a different structure” in any trade deal with China.

While shares of international automakers skidded on the tariff possibility, shares of U.S. automakers inched higher. Ford (F.N), General Motors (GM.N) and Tesla (TSLA.O) rose between 0.2 to 0.6 percent premarket.

At 7:34 a.m. ET, Dow e-minis 1YMc1 were down 27 points, or 0.11 percent. S&P 500 e-minis ESc1 were down 2 points, or 0.07 percent and Nasdaq 100 e-minis NQc1 were down 0.75 points, or 0.01 percent.

Wall Street posted small gains on Wednesday after minutes from the Fed’s latest meeting suggested higher inflation may not result in faster interest rate hikes.

Shares of Victoria’s Secret-owner L Brands (LB.N) fell 5.9 percent, while those of data storage equipment maker NetApp (NTAP.O) dropped 3.9 percent following the companies’ weak forecasts.

Williams-Sonoma (WSM.N) jumped 11.8 percent after the Pottery Barn owner posted strong quarterly results and gave a healthy forecast.

Initial jobless claims is expected to have fallen to 220,000 for last week, from 222,000 the week before. Data is due at 8:30 a.m. ET.

Asia share markets hit by U.S. auto tariff threat, dollar pulls back

Asian Stock Markets

Asian shares fell on Thursday after the U.S. government launched a national security probe into auto imports that could lead to new tariffs, and President Donald Trump’s comments indicated fresh setbacks in U.S.-China trade talks. 

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.1 percent higher, but Japan's Nikkei stock index .N225 fell 1.2 percent as auto shares slumped. South Korea's KOSPI lost 0.3 percent.

A broad MSCI index of automobile and auto components firms .MIWO0AC00PUS was down 0.9 percent. Tokyo’s SE TOPIX transportation equipment index .ITEQP.T was 2.6 percent lower.

The U.S. Commerce Department said on Wednesday that it would launch a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962, a move that could lead to tariffs like those imposed on steel and aluminium in March.

Adding to market jitters, Trump on Wednesday called for “a different structure” in any trade deal with China, fuelling uncertainty over the negotiations.

On Thursday, China’s Commerce Ministry said it had not pledged to cut China’s trade surplus with the U.S. by a certain figure, and that it hopes the U.S. implements measures promised during trade negotiations as soon as possible.

China's blue chip CSI 300 index .CSI300 was 0.1 percent lower.

Prompting further uncertainty, Trump on Wednesday cast doubt on plans for an unprecedented summit with North Korean leader Kim Jong Un, saying he would know next week whether the meeting would take place.

While the minutes from the Federal Reserve’s May 1-2 meeting indicated that policymakers expect another interest rate increase would be warranted “soon” if the U.S. economic outlook remains intact, they helped to ease market concerns that the Fed would accelerate the pace of interest rate increases.

The two-year Treasury note yield US2YT=RR, which rises with traders’ expectations of higher Fed fund rates, was at 2.5121 percent after touching 2.5970 on Wednesday.

The yield on benchmark 10-year Treasury notes US10YT=RR fell back below the 3-percent threshold to 2.9825 percent, compared with its U.S. close of 3.003 percent on Wednesday.

Analysts said that market uncertainty was prompting a clear flight to safety across financial markets.

The dollar was down 0.6 percent against the yen to 109.44 JPY=.

The euro EUR= was up 0.1 percent on the day at $1.1709. The dollar index .DXY, which tracks the greenback against a basket of six major rivals, was 0.2 percent lower at 93.839.

Concerns over trade, talks and tariffs overpowered indications of strong economic performance in two of the region’s major economies.

Confidence among Japanese manufacturers saw its first rise in fourth months, and service-sector sentiment rose to a record high in the latest Reuters Tankan poll, underscoring expectations that the Japanese economy will return to growth in the second quarter.

In South Korea, Finance Minister Kim Dong-yeon said the economy is on track for annual growth of 3 percent despite concerning indicators such as high youth unemployment.

The Bank of Korea held interest rates steady for a sixth straight month on Thursday, with inflation seen remaining below target and amid concerns a U.S.-China trade war would hurt regional economies.

In commodities markets, U.S. crude CLc1 was down 0.2 percent at $71.68 a barrel. Oil prices fell on Wednesday after an unexpected rise in U.S. crude and gasoline inventories.

Brent LCOc1 futures were 0.3 percent lower at $79.53 a barrel, continuing to move lower after rising above $80 for the first time since November 2014 last week.

The most-traded iron ore futures on the Dalian Commodity Exchange DCIOcv1 rose for the first time in six sessions on Thursday, gaining 0.3 percent.

Weak commodity prices continued to put pressure on Australian shares , which were 0.2 percent lower, extending losses into a sixth consecutive session. New Zealand's benchmark S&P/NZX 50 index .NZ50 was 0.7 percent higher.

Gold was slightly higher. Spot gold XAU= was traded at $1,294.11 per ounce.

China's aluminium and steel exports rise up after defying U.S. tariffs

Asian Stock Markets

China’s aluminum exports inched higher and steel shipments jumped in April, customs data showed on Tuesday, as U.S. import tariffs failed to dent overseas shipments from the world’s biggest producer of the two metals. 

The United States imposed a 25 percent duty on steel imports and a 10 percent tariff on aluminum imports, effective from March 23 as U.S. President Donald Trump sought to protect U.S. metal makers.

The impact of the tariffs on aluminum was offset by U.S. sanctions on giant Russian producer Rusal that caused a spike in international prices, prompting Chinese firms to send more metal abroad, analysts said.

China’s unwrought aluminum and aluminum product exports came in at 451,000 tonnes last month, up 0.2 percent from a revised 450,000 tonnes in March and up 4.9 percent from 430,000 tonnes in April 2017, the General Administration of Customs said.

Steel exports jumped 14.7 percent from March to 6.48 million tonnes, their highest level since August last year, and steady with a year ago.
 
April has one less day than March, so the latest increases are greater on a daily basis.

The United States accounts for around 14 percent of China’s aluminum exports, but only 1 percent of its steel exports.

Washington imposed sanctions on Rusal, the world’s second-biggest aluminum producer, on April 6, causing London Metal Exchange aluminum prices to climb 12.5 percent last month on fears of a supply shortage.

Shanghai aluminum prices rose only 4.8 percent in April in a well supplied Chinese market, with the wider price arbitrage making Chinese exports more profitable.

The jump in steel exports came despite the tariffs and a 7.6 percent jump in Shanghai rebar prices in April, making Chinese steel more expensive.

April was the first full month after the end of winter restrictions on industrial output in northern China, including on steel and aluminum, although some key steel cities still have curbs in place.

EU starts monitoring aluminum imports after U.S. tariffs

European Stock Markets

The European Union has started monitoring imports of aluminum to determine whether U.S. tariffs have led to a surge in shipments of the metal into Europe, the EU official journal said on Thursday. 

 Data collected on the quantity and value of incoming aluminum products will help the bloc decide whether to take measures to limit imports.

The European Commission began an investigation last month to assess the need for potential “safeguard” measures for steel.. Steel imports have been under surveillance since April 2016.

The United States imposed import tariffs of 25 percent on steel and 10 percent on aluminum in March, although the European Union and six other countries secured temporary exemptions

The Commission, which oversees trade policy in the 28-nation EU, believes that the 10 percent tariff introduced by the United States has increased the risk that more aluminum will be diverted to Europe at depressed prices.

The EU official journal said that aluminum product imports increased by 28 percent between 2013 and 2017, while prices of such imports fell by 5 percent.

Significant oversupply has built up since the early 2000s, with most of the new capacity in China, the journal said.

It added that although China exports very little primary aluminum, this has depressed prices of the globally traded commodity.

In the European Union, only 16 smelters are still in operation, compared with 26 in 2008, and a number are at risk of closure, it added.

The surveillance will apply to imports of aluminum exceeding 2.5 tonnes.

Asian bonds and yen gain as trade war fears drive rush to safety

Asian Stock Markets

The rumblings of a global trade war shook stock and currency markets on Friday after U.S. President Donald Trump announced long-promised tariffs on Chinese goods and Beijing pledged to fight any such war to the end. 

S&P futures ESc1 were down 0.6 percent, suggesting a weaker open on Wall Street later in the day.

Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, although they have a 30-day consultation period, raising the chance that final measures could be watered down.

Investors fear that the U.S. measures could escalate into a trade war, with potentially dire consequences for the global economy.

Beijing urged the United States on Friday to “pull back from the brink”.

China unveiled its own plans on Friday to impose tariffs on up to $3 billion of U.S. imports in retaliation against U.S. tariffs on Chinese steel and aluminium products.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 2.5 percent as stocks across the region dropped. For the week, the index recoiled over 4 percent.

Shanghai shares .SSEC were down 3.8 percent.

Japan's Nikkei .N225 dropped 4.5 percent.

Australian stocks lost 1.9 percent, Hong Kong's Hang Seng .HSI was down 3.1 percent, Taiwan shares .TWII slid 1.6 percent and South Korea's KOSPI .KS11 retreated almost 3 percent.

Setting a downbeat tone for Asia, the Dow .DJI on Thursday shed 2.9 percent, the S&P 500 .SPX dropped 2.5 percent and the Nasdaq .IXIC fell 2.4 percent.[.N]

As equities took a beating, the yen, often sought in times of market turmoil, rallied against the dollar.

The greenback fell roughly 0.5 percent to as low as 104.635 yen JPY=, its weakest since November 2016. The dollar was down more than 1 percent on the week.

The 10-year Japanese government bond (JGB) yield dipped to a four-month trough of 0.020 percent JP10YTN=JBTC.

Safe-haven spot gold XAU= rose to $1,339.12 an ounce, highest since March 7. [GOL/]

Other commodities did not fare as well amid the trade war fears, with copper on the London Metal Exchange CMCU3 falling to a three-month low of $6,628.00 per tonne. [MET/L]

Iron ore futures on China’s Dalian Commodity Exchange DCIOcv1 lost more than 5 percent.

U.S. expected to impose up to $60 billion in China tariffs by Friday

Asian Stock Markets

The Trump administration is expected to unveil up to $60 billion in new tariffs on Chinese imports by Friday, targeting technology, telecommunications and intellectual property, two officials briefed on the matter said Monday. 

One business source, who has discussed the issue with the administration, said that the China tariffs may be subject to a public comment period, which would delay their effective date and allow industry groups and companies to lodge objections. 

This would be considerably different from the quick implementation of the steel and aluminum tariffs, which are set to go into effect on March 23, just 15 days after President Donald Trump signed the proclamations. 

A delayed approach could allow time for negotiations with Beijing to try to resolve trade issues related to the administration’s “Section 301” probe into China’s intellectual property practices before tariffs take effect. 

The White House declined to comment Monday. China has vowed to take retaliatory measures in response. 

A source who had direct knowledge of the administration’s thinking told Reuters last week that the tariffs, authorized under the 1974 U.S. Trade Act, would be chiefly targeted at information technology, consumer electronics and telecoms and other products benefiting from U.S. intellectual property. 

But they could be much broader and hit consumer products such as clothing and footwear, with a list eventually running to 100 products, this person said. 

China runs a $375 billion trade surplus with the United States and when President Xi Jinping’s top economic adviser visited Washington recently, the administration pressed him to come up with a way of reducing that number. 

Expectations of the anti-China tariffs have alarmed dozens of U.S. business groups, who warned on Sunday they would raise prices for consumers, kill jobs and drive down financial markets.

Asian shares faltered, as U.S. trade fears eclipse strong China data

Asian Stock Markets

Shares faltered and the dollar skidded on Wednesday as investors fretted over the threat of new U.S. tariffs on Chinese imports, brushing aside data that showed the Asian economy got off to a solid start in 2018. 

Investor appetite for risk was also hit by U.S. President Donald Trump’s move to fire his Secretary of State, regarded as a moderate in his administration, reinforcing market uncertainty about Trump’s future policies. 

In a sign the equity market sell-off would extend elsewhere, S&P E-Mini futures ESc1 were down 0.1 percent while FTSE futures FFIc1 slipped 0.3 percent. 

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS stumbled 0.7 percent, retreating from a 1-1/2 month high on Tuesday, with the technology sector the biggest drag. 

Japan's Nikkei .N225 dropped 0.8 percent. China's SSE Composite index .SSEC and the blue-chip CSI 300 .CSI300 fell 0.5 percent each.

The MSCI Asia ex-Japan IT index MIAX0IT00PUS declined 0.5 percent as Trump sought to impose tariffs on up to $60 billion against information technology, consumer electronics and telecoms.

Large Asian technology stocks such as LG Display (034220.KS), Tencent Holdings (0700.HK) and Taiwan Semiconductor (2330.TW) were all down by more than 1 percent.

Investors suspect policymakers who favour protectionism will also seek to use the currency as a trade weapon, if not overtly then through benign neglect.

As news from the United States dominated, the market shrugged off stronger-than-expected data from China which showed the country’s industrial output expanded at a surprisingly faster pace at the start of the year. Fixed asset investment also handily beat forecasts, while retail sales improved from December.

Still, investors were inconsolable and followed overnight losses on Wall Street with the Dow .DJI off 0.7 percent, the S&P 500 .SPX down 0.6 percent and the Nasdaq Composite .IXIC falling 1.0 percent.

The selling intensified after Trump dismissed Tillerson following a series of public rifts over policy on North Korea, Russia and Iran. He was replaced with loyalist CIA Director Mike Pompeo.

The move comes only days after the exit of White House economic advisor Gary Cohn who was a strong proponent of free trade.

Tillerson’s dismissal and the risk of new import duties on China coincided with subdued U.S. consumer price data on Tuesday with annual core inflation, at 1.8 percent, meeting expectations.

The in-line reading should have been positive for risky assets as it was the fear of a pick-up in inflation and in-turn faster U.S. rate hikes that had hit global shares in early February.

But the inflation data did little to move market expectations of Fed rate rises with an increase next week now fully priced-in.

All that put together meant dollar weakness across a basket of currencies .DXY. It eased a tad to 106.5 yen. JPY=

The yen did dip briefly after minutes of the Bank of Japan’s January meeting showed most policymakers shared the view that the central bank should “persistently” pursue powerful monetary easing.

The euro rose overnight to edge towards a recent one-month top of $1.2446 EUR=. It was last at $1.2405, while the pound GBP= was firmer at $1.3989.

In commodities, oil prices were mixed U.S. crude CLcv1 up 2 cents at $60.73. Brent LCOc1 fell 10 cents to $64.54.

Spot gold XAU= was a touch firmer at $1,327.82 an ounce.

Euro gains with rebound in risk appetite

European Stock Markets

The euro gained on Monday and the dollar dropped as last week’s strong U.S. jobs numbers and receding fears over a trade war helped a rebound in risk appetite, with higher yielding currencies also performing well. 

With little crucial economic data due in Europe, traders will focus on a meeting of the euro zone finance ministers on Monday for any comments on trade protectionism after President Donald Trump’s decision to impose some tariffs.

While the euro fell last week as the European Central Bank gave a more-dovish-than-expected meeting, traders have pushed the euro higher as they bet investors will continue to put more money into a region where the economies are booming.

The euro rose to $1.2328, up 0.2 percent. The single currency, after a strong start to 2018, remains below the three-year peak hit in February of $1.2556.

The dollar, which has tended to fall when risk appetite is rising, meanwhile fell. The greenback against a basket of currencies dropped 0.1 percent.

The strong U.S. job growth data released on Friday was counterbalanced by slower increases in wages, resulting in money market traders sticking to bets that the Fed would raise interest rates three times this year, with only around a one-in-four chance seen for a fourth rate hike in 2018.

Higher-yielding currencies like the Australian and New Zealand dollars also rose, while sterling gained 0.2 percent to trade at $1.3871.

The yen, which tends to perform well when markets are anxious, gained as traders eyed a suspected Japan cronyism scandal involving the sale of state-owned land for its impact.

The name of Japanese Prime Minister Shinzo Abe’s wife was removed from documents regarding the issue, media said on Monday, as pressure mounted on the premier and his ally Finance Minister Taro Aso over a possible cover-up.

Market participants said the political developments in Japan helped temper gains in Japanese equities and lent some support to the yen.

The dollar eased 0.3 percent to 106.51 yen, edging away from a one-week high of 107.05 yen set on Friday.

The dollar had risen against the yen last week as risk appetite improved on hopes for a breakthrough in the standoff over North Korea’s nuclear weapons program.

The greenback also gained ground against the yen last week as fears of a global trade war receded.

NZ seeks exemptions from US steel and aluminium tariffs

New Zealand Stock Markets

New Zealand is actively seeking exemption from the punitive tariffs imposed on imports of steel and aluminium to the United States, arguing the country has a relationship with the US "not unlike Australia's",  is running a trade deficit with the US, and is such a small producer that it represents no threat to US manufacturers.

Prime Minister Jacinda Ardern and Trade Minister David Parker fronted an announcement after the weekly Cabinet meeting, with Parker saying he had been working on the attempted exemption since before he departed for the March 8 signing of the Comprehensive and Progressive Trans-Pacific Partnership trade and investment pact in Chile.

New Zealand's two largest metal production plants are owned by Australian companies. The New Zealand Steel refinery at Glenbrook, South Auckland, is owned by Bluescope, while Rio Tinto is the majority shareholder in New Zealand Aluminium Smelters, which operates plant at Tiwai Point, near Bluff.

Ardern said New Zealand exported $39 million and $23 million worth of steel and aluminium respectively in the last year, although "not small for those who are exporting".

US President Donald Trump has cited both the trade surplus the US runs with Australia and its defence alliance as reasons for exempting Australia from the tariffs.

New Zealand has not been a formal military of the US since the rift over the ANZUS Treaty, caused by New Zealand's anti-nuclear policy since the mid-1980s, although defence and diplomatic relations have become warmer.

Commenting on speculation about the potential for ex-patriate New Zealander Chris Liddell to replace Gary Cohn as Trump's chief economic adviser, Parker said he expected Liddell would be wanting to do his duty by his new employer but also what he could for New Zealand.

FTSE treads with little change as Trump softens tariff stance

European Stock Markets

UK shares were little changed on Friday after U.S. President Donald Trump softened his stance on trade tariffs, easing worries over a trade war that had weighed on equity markets.

The country's blue chip FTSE  benchmark index was flat at 0938 GMT, moving in a narrow range and line with the broader European market, while mid-caps added 0.28 percent as investors digested a number of earnings updates. 

Trump announced import tariffs on steel and aluminium but said Canada and Mexico would be exempt and that other countries could apply for exemptions, although details of when they would be granted were thin. 

The FTSE, which is down around 6 percent so far this year, was little changed after data showed that UK industrial output in February rose 1.3 percent but missed expectations for a 1.5 percent rise. 

Later in the session, investors will keep an eye on the U.S. jobs report for more clues on the pace of interest rate hikes in the world’s largest economy. 

On Friday there was little specific company news to capture investors’ attention.

The biggest FTSE gainer was NMC Health (NMC.L), which briefly touched a record high, up as much as 5.7 percent following a well received trading update earlier this week. The stock was up 3.1 percent. 

The UAE healthcare provider reported a 38.2 percent rise in annual net profit on Wednesday and said acquisitions this year could top the $641 million it spent in 2017. 

Vodafone (VOD.L) was a weak spot, down 0.6 percent, after Bernstein analyst downgraded the stock to market perform. 

On the midcap index, Renewi (RWI.L) fell 6 percent after the waste-to-product company said it would take an impairment charge following the review of contracts in its UK municipal division. 

Inmarsat (ISA.L) fell 5 percent after a quarterly update which was in line with expectations. Morgan Stanley analysts said comments around its government business were cautious, indicating that consensus expectations for 2019 revenue growth of 5 percent were too high. 

GVC Holdings (GVC.L) rose 3.3 percent after the online gambling firm saw full-year net gaming revenue rise 17 percent in 2017, helped by gains from the bwin.party businesses it bought three years ago. GVC is set to take over Britain’s largest bookmaker Ladbrokes Coral (LCL.L).

Asia's biggest exporters bristle over U.S. tariffs, fanning trade war fears

Asian Stock Markets

Major Asian nations reacted sharply on Friday to U.S. President Donald Trump’s decision to impose tariffs on steel and aluminum imports, warning of damage to relations amid industry calls for retaliation. 

Japan said the move would have a “big impact” on the countries’ close bilateral ties, while China said it was “resolutely opposed” to the decision and South Korea said it may file a complaint to the World Trade Organization. 

Trump on Thursday pressed ahead with the imposition of 25 percent tariffs on steel imports and 10 percent for aluminum on Thursday, though he announced exemptions for Canada and Mexico, and said exceptions could also be made for other allies. 

China, which produces half the world’s steel, will assess any damage caused by the U.S. move and “firmly defend its legitimate rights and interests,” the country’s Ministry of Commerce said. 

The tariffs would “seriously impact the normal order of international trade,” the ministry said. 

The European Union, Brazil and Argentina said overnight they should not be targeted or would seek exemptions, and both Japan and South Korea said they would ask to be made exceptions also.

South Korea, a key Washington Asian ally, is the third largest steel exporter to the United States, after Canada and Brazil.

The U.S. is the world’s biggest importer of steel, purchasing 35 million tonnes of raw material in 2017. Of those imports, South Korea, Japan, China and India accounted for 6.6 million tonnes. 

Trade tensions between China and United States have risen since Trump took office. 

China accounts for only a small fraction of U.S. steel imports, but its massive industrial expansion has helped create a global glut of steel that has driven down prices. 

China’s steel and metals associations urged the government to retaliate against the United States, citing imports ranging from stainless steel to coal, agricultural products and electronics. 

It was the most explicit threat yet from the country in an escalating trade spat. 

The dispute has fueled concerns that soybeans, the United States’ most valuable export to the world’s second largest economy, might be caught up in the trade actions after Beijing launched a probe into imports of U.S. sorghum, a grain used in animal feed and liquor.

Gold steadies ahead of ECB meet

Global Stock Markets

Gold steadied on Thursday as uncertainty ahead of a European Central Bank policy meeting and further news on US trade tariffs kept the metal in a narrow range, though a stronger dollar pressured prices. 

The dollar firmed after the White House indicated that key trading partners could be exempt from the steel and aluminium import tariffs it proposed last week.

Spot gold was at $1,325.69 an ounce by 1025 GMT, little changed from late on Wednesday, when it rose to a one-week high of $1,340.42 before closing 0.6 percent lower. U.S. gold futures were down 0.1 percent at $1,326.40. ABN Amro analyst Georgette Boele said the dollar would remain the key driver of gold prices in the near term.

The ECB is expected to keep policy unchanged on Thursday but could tweak its accompanying statement to offer some clues about plans to end its unprecedented bond purchases this year. Friday's non-farm payrolls data for February, a key barometer of the U.S. economy, is also being awaited for further clues on the pace of Federal Reserve rate increases.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

In the medium term gold will come under temporary pressure from interest rate hikes, said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

Gold traders are also awaiting further news on plans for U.S. tariffs on some imported goods. 

The White House said late on Wednesday that Canada, Mexico and possibly other countries may be granted exemptions, at least for a while. Trump will sign a proclamation establishing the tariffs during a ceremony scheduled for 2030 GMT, a source familiar with the situation said. 

Silver was down 0.2 percent at $16.47 an ounce, while platinum fell 0.4 percent to $948.70 after touching its lowest since Jan. 4 at $943. 

Palladium was down 0.1 percent at $968.50 after dropping to its lowest since Feb. 9 at $961.55 on Wednesday.

China warns of 'necessary response' in event of trade war with U.S.

Asian Stock Markets

China will make a necessary response in the event of a trade war with the United States, Foreign Minister Wang Yi said on Thursday, while warning that such a war would only harm all sides. 

 

U.S. President Donald Trump is expected to establish tariffs of 25 percent on imported steel and 10 percent on imported aluminum this week, but the White House has said there could be a 30-day exemption for Mexico and Canada and some other countries based on national security.

Such a move aims to counter cheap imports, especially from China, that Trump says undermine U.S. industry and jobs. His administration has faced growing opposition to the tariffs from prominent congressional 

Republicans and business officials worried about their potential impact on the economy.

Wang, speaking on the sidelines of an annual meeting of China’s parliament, said China and the 

United States did not have to be rivals, and history showed that trade wars were not the correct way to resolve problems.

Trump addressed trade with China in tweets on Wednesday, demanding that it lay out plans for reducing its trade surplus with the United States by $1 billion, which appeared to have been raised during a meeting with a top Chinese official last week.

Especially given today’s globalization, choosing a trade war is a mistaken prescription. The outcome will only be harmful, Wang said. China would have to make a justified and necessary response, he said.

China ran a record goods trade surplus with the United States last year of $375.2 billion.

Trade tensions between the world’s two largest economies have risen since Trump took office in 2017, and although China only accounts for a small fraction of U.S. steel imports, its massive industry expansion has helped produce a global glut of steel that has driven down prices.

Trump is also considering potential trade sanctions against China under a “Section 301” investigation into its intellectual property practices and pressure on foreign companies for technology transfers.

Diplomatic and U.S. business sources say the United States has all but frozen a formal mechanism for talks on commercial disputes with China because it is not satisfied it has met its promises to ease market restrictions. 

China’s latest trade date released on Thursday showed its February exports rose 44.5 percent from a year earlier, beating market expectations, while imports grew 6.3 percent. That left it with a trade surplus of $33.74 billion for the month. 

China’s trade performance rebounded in 2017 and logged a strong start this year thanks to robust demand at home and abroad. 

But the rapidly escalating trade tensions with the United States are clouding the outlook for exports, while a cooling property market may curb domestic demand for imported raw materials such as iron ore.

U.S. considering broad curbs on Chinese Imports

The Trump administration is considering clamping down on Chinese investments in the U.S. and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property, according to people familiar with the matter.

An announcement following an investigation by the U.S. Trade Representative’s office into China’s IP practices is expected in the coming weeks, potentially handing President Donald Trump further cause to impose trade restrictions. 

His announcement last week of tariffs on steel and aluminum imports has already ratcheted up global trade tensions -- and led to the resignation Tuesday of his chief economic adviser Gary Cohn, who opposes such measures.

Trump tweeted he’ll be making a decision on a replacement soon and that there are “many people wanting the job.” The dollar fell and the yen -- often a haven in turmoil -- jumped as much as 0.6 percent to 105.46 per dollar, approaching a 16-month high set last week. Asian equities declined.

The president is now fighting trade offensives on multiple fronts, from targeting strategic rival China to angering allies like Canada and the European Union with threats to erect fresh barriers. While his counterparts have threatened retaliation, concrete action that would herald the start of an all-out trade war has yet to come.

Liu He, President Xi Jinping’s top economic adviser who met with Cohn in Washington last week, told delegates at the National People’s Congress in Beijing that both sides had expressed a desire to avoid a trade war, according to the Beijing Youth Daily. Chinese officials -- who have been studying curbs on U.S. products such as soybeans according to past reports -- were otherwise largely quiet on the tariff question Wednesday. 

Under the most severe scenario being weighed, the U.S. could impose tariffs on a wide range of Chinese imports, from shoes and clothing to consumer electronics, according to two people familiar with the matter who spoke on condition of anonymity because the discussions aren’t public.

The Trump administration could combine the tariffs with restrictions on Chinese investments in the U.S., which are reviewed for national-security risks by Treasury’s Committee on Foreign Investment in the U.S., the people said. The new measures being considered by the administration could go beyond even domestic security considerations.

With the probe into China, known as a Section 301 action, U.S. officials are also considering a more targeted approach that would seek to rein in Chinese investments, the people said. 

The administration is looking at ways to enforce reciprocity with China on foreign investment, meaning the U.S. would only allow takeovers in sectors that U.S. companies can access in China, according to the people.

Treasury Secretary Steven Mnuchin has urged closer vetting of foreign takeovers, and Republican lawmakers are pushing legislation aimed at curbing China’s influence.

Shares recover as Trump tariff plan faces resistance

Global Stock Markets

Share markets in Asia and Europe regained ground on Tuesday after U.S. President Donald Trump faced growing pressure from political allies to pull back from proposed steel and aluminum tariffs and a potential global trade war. 

European sentiment was also supported after Germany reformed its coalition government to end more than five months in political limbo and as initial unease caused by a hefty election vote for anti-establishment parties in Italy began to ebb. 

Italian bonds gained and shares bounced almost 1 percent having slipped to a six-month low after the weekend vote. 

Europe’s big three - Britain’s FTSE, Germany’s Dax and France’s Cac - were up 0.5-1 percent too, with euro a fraction higher and the pound a touch weaker as the dollar steadied. [/FRX] 

Top U.S. Republican politicians, including House speaker Paul Ryan, urged Trump on Monday not to go ahead with tariffs on foreign imports of steel and aluminum. 

Even though the president said he would not back down, he suggested Canada and Mexico could be exempted if a new NAFTA trade deal was agreed. There was speculation that this had been the main motivation behind the plan

After Wall Street’s S&P 500 had put on more than 1 percent, Asia’s bourses rallied in concert overnight. 

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.5 percent, snapping five straight days of losses. Japan’s Nikkei jumped 1.8 percent from a five-month low, helped too by reassurances from the head of the Bank of Japan that it would not suddenly end stimulus. 

Korean shares also erased the remainder of the hit they took after Trump’s tariff warnings last week. The country is seen as being among the most exposed in Asia due to the large amount of steel it exports to the United States. 

The threat of a trade war is not the only source of tension for the world’s financial markets. 

As the global economy steams ahead, investors have become increasingly concerned that U.S. inflation, which has been subdued since the 2008 financial crisis, could finally pick up and lead to fast interest rate hikes. 

The European Central Bank meets this week and looks almost certain later this year to end its three-year-old, 2.5 trillion euro ($3.08 trillion) stimulus program. 

U.S. 10-year bond yields had reared back up to 2.8888 percent on Monday and most euro zone yields - with the exception of those in Italy - were following suit with German Bunds off a five-week low at 0.65 percent. 

The euro traded at $1.2340, having extend its recovery from a seven-week low of $1.2154. 

In Italy, where currency traders are keeping an eye on post-election developments as none of the three main factions has emerged with enough seats to govern alone, the country’s President, Sergio Mattarella, is expected to open formal coalition talks in April. 

Early elections are possible if no coalition accord is found. 

The Canadian dollar was stuck near an eight month low at C$1.2995. 

In commodities, crude prices held firm, underpinned by robust demand forecasts and prospects for informal contacts sought by OPEC with U.S. shale oil producers at an industry meeting in Houston this week. 

U.S. West Texas Intermediate crude futures traded at $62.69 per barrel, up 0.2 percent following a 2.2 percent gain on Monday. Bellwether industrial metal copper gained 1 percent in its biggest jump in almost a month. 

China’s government said on Monday it was confident about keeping its growth rate at around 6.5 percent this year and on Tuesday defended a move to hike military spending by the biggest amount in three years.

EU Proposes Retaliatory Tariff of 25% Against U.S. Goods

European Stock Markets

The European Union intends to target 2.8 billion euros ($3.5 billion) of U.S. goods ranging from T-shirts and whiskey to motorcycles and ladders should President Donald Trump go ahead with his plan to impose a 25 percent tariff on foreign steel.

The EU aims to apply a tit-for-tat levy on a range of consumer, agricultural and steel goods imported from the U.S., according to a list drawn up by the European Commission and obtained by Bloomberg News.

The commission, the EU’s executive arm, discussed the measures with representatives of the bloc’s governments at a meeting on Monday evening in Brussels.

The EU’s retaliatory list targets imports from the U.S. of shirts, jeans, cosmetics, other consumer goods, motorbikes and pleasure boats worth around 1 billion euros; orange juice, bourbon whiskey, corn and other agricultural products totaling 951 million euros; and steel and other industrial products valued at 854 million euros.

Trump’s vow to curb U.S. imports of foreign steel has sparked opposition within his Republican Party and is based on a national-security argument that the EU dismisses.

The White House threat risks provoking retaliation across the globe and a slew of complaints to the World Trade Organization, which has never ruled on a dispute involving trade restrictions justified on national-security grounds.

Europe has expressed growing concerns about Trump’s protectionist stance on international trade.

The list of U.S. goods on which the EU intends to apply its own 25 percent tariff sends a political message to Washington about the potential domestic economic costs of making good on the president’s threat.

Paul Ryan, Republican speaker of the House of Representatives, comes from the same state -- Wisconsin -- where motorbike maker Harley-Davidson Inc. is based.

Earlier this week, Ryan said he was “extremely worried about the consequences of a trade war” and urged Trump to drop his steel-tariff plan.

European Commission President Jean-Claude Juncker and his leadership team are due to discuss the retaliation proposal at a meeting on Wednesday.

The commission is also weighing filing a complaint to the WTO against the U.S. and introducing “safeguard” measures to prevent steel shipments from other parts of the world to America from being diverted to the European market and flooding it.

European shares down to six-month lows

European Stock Markets

European shares fell to six-month lows on Friday after Donald Trump said the United States would impose tariffs on imported steel and aluminium, prompting worries about a global trade war. 

Such concerns sparked a broad sell-off in Europe, weighing particularly on the export-oriented German DAX index, which fell 2.3 percent to a six-month low. 

The broader pan-European STOXX 600 benchmark was down 2.1 percent, surpassing a low hit in early February during a brutal sell-off in global equities, also hitting a six-month low. 

Trump said duties of 25 percent on steel and 10 percent on aluminium would be formally announced next week, sparking concerns about retaliatory moves from major trade partners such as China, Europe and neighbouring Canada. 

All sectors were trading in negative territory, with autos .SXAP down 2.3 percent, weighed down by a near-6 percent slump in Italian-American car maker Fiat Chrysler (FCHA.MI) on concerns that the U.S. tariff move could increase its raw material costs.

Elsewhere, Germany’s Volkswagen (VOWG_p.DE), Daimler (DAIGn.DE) and BMW (BMWG.DE) and France’s Peugeot (PEUP.PA) fell between 1.6 to 2.4 percent.

Steel and aluminium stocks were also generally lower, with ArcelorMittal (MT.AS), Salzgitter (SZGG.DE) and Norsk Hydro (NHY.OL) all down 0.9 to 5.2 percent.

Trump officially has until April 11 to announce his final decision and an analyst at Jefferies said they expected the final policy to be more nuanced due to a mounting pushback from domestic steel consumers and foreign steel suppliers.

They said it still remained unclear which countries and products would be targeted by the measures.

Swedish radiation therapy equipment maker Elekta (EKTAb.ST), up 13.2 percent, led gainers on the STOXX after it reported above-forecast earnings, while IMI (IMI.L) dropped 8.5 percent as its trading update disappointed.

The STOXX ended the week down 3.7 percent ahead of events this Sunday in Italy and Germany that could raise new jitters over the political future of Europe, as Brexit talks with the UK continue.

Italy is holding a general election, and Germany’s SPD party will announce the result of a member’s poll on a deal to renew a“grand coalition” government with Angela Merkel’s conservatives following an inconclusive election last year.

So far this year Italy's benchmark index .FTMIB has managed just a 0.3 percent gain, while Germany's DAX is down 7.8 percent.

Trump Likely to Impose Stiff Steel, Aluminum Tariffs

Asian Stock Markets

President Donald Trump is set to announce steep tariffs on steel and aluminum imports Thursday, people familiar with the matter said, in what would be one of his toughest actions yet to implement a hawkish trade agenda that risks antagonizing friends and foes alike.

Trump told aides he wants to announce tariffs of 25 percent on steel and 10 percent on aluminum from all countries, according to two people who asked not to be identified because the deliberations aren’t public. One person said the details of the decision may still change, and it’s possible some countries may be granted exemptions.

Trump has been considering a range of options to curb imports of steel and aluminum, after the Commerce Department concluded shipments of the two metals hurt U.S. national security. Leading up to the decision, the president told confidantes he was leaning toward a 24 percent tariff on steel, the harshest of the alternatives given to him by Commerce.

The U.S. move may provoke retaliation from China, the world’s biggest steel and aluminum producer, at a time when President Xi Jinping’s top economic adviser, Liu He, has been dispatched the U.S. in attempt defuse tensions. China has already launched a probe into U.S. imports of sorghum, and is studying whether to restrict shipments of U.S. soybeans -- targets that could hurt Trump’s support in some politically important farming states.

Asian steel stocks declined. Nippon Steel & Sumitomo Metal Corp. and JFE Holdings Inc. slumped in Tokyo while Baoshan Iron & Steel Co. fell in Shanghai, Hesteel Co. retreated in Shenzhen and BlueScope Steel Ltd. dropped in Sydney.

While China accounts for just a fraction of U.S. imports of the metals, it’s accused of flooding the global market and dragging down prices.

The decision may also harm relations with key allies including Canada and Mexico, which are already locked in discussions over U.S. demands to change the North American Free Trade Agreement. Canada is the biggest foreign supplier of U.S. steel.

The European Union has suggested such an action by the U.S. would face a legal challenge at the World Trade Organization. At home, consumers could see price hikes for everything from cars to beer cans that would be triggered by tariffs.

Defense Secretary James Mattis had lobbied the president for targeted options on steel, warning that sweeping measures could undermine U.S. relations with its allies. European officials have argued that it doesn’t make sense to penalize members of the Nato defense alliance in the name of security.

The announcement will end months of uncertainty over the steel and aluminum market. Last April, the president ordered Commerce to study the impact of steel and aluminum imports on national security under seldom-used section 232 of the 1962 Trade Expansion Act. The department submitted its final reports to the president in January.

U.S. rhetoric appears to be getting more aggressive going into the midterm elections, though Beijing still has plenty of ways to hit back, according to Dwyfor Evans, head of Asia-Pacific macro strategy at State Street Global Markets in Hong Kong.