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2 July 2018
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Japan financial markets (The Total Investment & Insurance
Solutions)
Global stocks fell Monday as weaker-than-expected Asian economic surveys
ratcheted up worries over the potential impact of higher tariffs due to be
imposed by China and the U.S. in a festering trade dispute. In Europe, a German
government crisis weighed on markets.
KEEPING SCORE: Germany's DAX was down 0.8
percent to 12,212 and France's CAC 40 lost 1.2 percent to 5,258. Britain's FTSE
100 shed 1 percent to 7,562. Wall Street was poised to open lower. Dow futures
fell 0.5 percent and S&P 500 futures were down 0.6 percent.
ASIA'S DAY: Asian markets were overshadowed
by weaker than expected Chinese manufacturing data and a softening in Japan's
economic outlook. Japan's benchmark Nikkei 225 index plunged 2.2 percent to
21,811.93 and South Korea's Kospi shed 2.4 percent to 2,271.54. The Shanghai
Composite index tumbled 2.5 percent to 2,775.56 while Australia's S&P/ASX
200 lost 0.3 percent to 6,177.80. Hong Kong's markets were closed for a market
holiday. Taiwan's benchmark fell but Southeast Asian indexes were mixed.
GERMAN CRISIS LINGERS: German Chancellor
Angela Merkel has been locked for weeks in a bitter dispute with her Bavarian
allies over migration. The government crisis was prolonged on Sunday when
interior minister Horst Seehofer offered to resign instead of backing down from
his stance against the chancellor's migration policies. Seehofer is determined
to turn away some types of asylum-seekers at Germany's borders, but Merkel has
insisted on Europe-wide solutions. There's little sign of a possible compromise
and the standoff could spell the end of Merkel's fourth government.
CHINESE DATA: China's manufacturing activity
slowed in June, adding to concerns that the economy is cooling due to tighter government
controls on lending. The Caixin Manufacturing PMI, which measures growth in the
sector, came in at 51.0 in June, down slightly from 51.1 in May. The index is
on a 100-point scale, with 50 separating contraction from growth. In Japan, a
central bank survey showed the corporate outlook has worsened from three months
ago, highlighting risks to its export-reliant economy from trade tensions. The
Bank of Japan's "tankan" survey measuring confidence among
large-scale manufacturers was at 21 points, down 3 from the March survey, which
was the first decline in two years.
U.S-CHINA TARIFFS: The U.S. is set to impose
a 25 percent tariff on up to $50 billion of Chinese products starting this
Friday. In response, China will raise import duties on $34 billion worth of
American goods. On Sunday, Canada started billions of dollars in retaliatory
tariffs against the U.S., in a tit-for-tat response to the Trump
administration's duties on Canadian steel and aluminum. The items include
ketchup, lawn mowers and motor boats. Some items will be subject to taxes of 10
or 25 percent. The U.S. has also faced hit back from the European Union. Iconic
American motorcycle maker Harley-Davidson will move some production overseas to
avoid tariffs the European Union is placing on motorcycles made in the U.S.
ANALYST'S TAKE: "There is caution over
the imposition of tariffs this weekend. Taken together, weaker-than-expected
data gives markets room for thought on whether Trump protectionism has seeped
into the real economy," said Song Seng Wun, an economist at CIMB Private
Banking.
ENERGY: Trump has claimed that Saudi Arabia
will raise oil production by "maybe up to 2,000,000 barrels" in
response to turmoil in Iran and Venezuela. This is higher than the 1 million
barrels-a-day increase that OPEC countries have agreed on, sending oil futures
on a decline. Benchmark U.S. crude fell 12 cents to $74.03 a barrel in
electronic trading on the New York Mercantile Exchange. Brent crude, used to
price international oils, fell 55 cents to $78.68 in London.
CURRENCIES: The dollar ticked up to 110.76
yen from 110.74 yen in late trading Friday. The euro weakened to $1.1643 from
$1.1695.The Total Investment &
Insurance Solutions
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