LONDON, May 31 (Reuters) - The next few days could be significant for the security relationship between Europe and the United States - with a Chinese
LONDON, May 31 (Reuters) – The next few days could be significant for the security relationship between Europe and the United States – with a Chinese telephone company at the heart of the matter. Washington sees Huawei as a threat to NATO security and is determined to press its “zero risk” policy of excluding the group Western telecom infrastructure. That is the message U.S. Secretary of State Mike Pompeo will take this morning to Germany’s Angela Merkel, who only minutes later will be receiving Chinese Vice President Wang Qishan. Pompeo had […] results would translate to an actual election, which would be run under Britain’s first-past-the-post system, which favours larger parties over smaller ones, but it’s clear that the decades-old Conservative-Labour dominance is being threatened.
A Reuters poll of economists concluded that the European Central Bank has no prospect of raising interest rates through 2020 and instead will at some point signal that a further easing is on the cards. Perhaps more interesting, however, is that the May 24-30 poll showed almost no change to euro zone growth and inflation forecasts, nor any change to the probability of recession, despite clear evidence that the bloc’s economy is under pressure. The median probability of a euro zone recession was just 20% in the next year, rising to 30% in the next two years. Both figures are lower than probabilities polled for the United States, at 25% […] respondent noted, could all change if Trump raises tariffs on Chinese goods, a move that would have a ricochet effect on economic activity across the world, notably in the export-dependent eurozone.
MARKETS AT 0655 GMT U.S. President Donald Trump has lobbed another grenade into the trade battle, this time announcing a 5% tariff on all Mexican imports June 10 unless […] carries through, Oxford Economics predicts, U.S. GDP growth would be reduced by at least 0.7 percentage points in 2020 and Mexico would into recession.
More confirmation that economic growth is under pressure came a Chinese manufacturing index that fell to 49.3 and an employment sub-index that reached its weakest since 2009. Finally, China confirmed reports it would use rare […] the United States.
Markets unsurprisingly are not taking it well. World shares and the SP500 are set for their first losing month this year, although the MSCI world stocks index is flat this morning. Possibly markets, clutching at straws, are also focusing on Federal Reserve Vice Chair Richard Claridaâ€™s comments that the Fed could cut rates should the growth outlook worsen. […] cut rates in the second half of the year. Mind, though, Clarida also said the U.S. economy looked to be in a “very good place”. In any case, Wall Street is set for a weak open, with S&P500 futures down almost 1% following yesterdayâ€™s roller-coaster ride that saw markets close slightly higher after earlier heavy losses. European shares are opening in the red, too.
The action instead is in safe-haven assets. Ten-year Treasury were down 5 bps this morning to the lowest since September 2017. German yields are headed towards the minus 0.20% hit three years ago. The […] yields are now almost 20 basis points above 10-year rates, the biggest inversion since May 2007. The Japanese yen has jumped 0.6% to the highest since early February and gold is up 0.4%, set for its first monthly gain of the year. But oil is down 1% and on course for its biggest monthly fall since November.
European shares are down, with the export-oriented German DAX down almost 1%.
Sectors most exposed to the international economy, such as autos and banks, are likely to suffer the most. Shares in companies with direct business in Mexico, such as Germany’s Volkswagen and Spanish bank BBVA, fell 2% to 3% in pre-market trade BBVA got 37% of its pre-tax profit Mexico in 2018. Fiat Chrysler, which is in merger talks with Renault, also produces cars in Mexico. Banks HSBC, Santander and Sabadell have a presence there, as does ArcelorMittal, which produces some steel in Mexico to import to the United States, and Italian pipes maker Tenaris.
Elsewhere, a Reuters report that Amazon is interested in buying a prepaid cellphone service T-Mobile and Sprint could lift shares in T-Mobile parent Deutche Telekom. A disappointing Wizz Air has sent its shares down 2% in pre-market trade. Traders say a BAML upgrade could lift shares in chipmakers and Amazon suppliers STMicro. But BAML downgraded Dialog Semi.
Monsanto woes continue for Bayer. Los Angeles County is suing Monsanto to help pay for reducing PCB contamination in dozens of bodies of water. Bayer shares are seen down 1% to 2%.
Legal & General will sell general insurance […] a holding company; Nissan’s technology could pay in Renault-FCA deal; Saipem units investigated in Brazil over alleged irregularities; Britain’s Rank Group in talks to buy online gaming firm Stride
The pan-European STOXX index is on track for its first negative month of 2019, having fallen 5% so far this month.
Emerging-market stocks are down 7.6% this month and currencies are treading water. The Chinese yuan is set for its biggest monthly fall since last June. Before Turkeyâ€™s central bank releases a financial stability report, the lira was down 0.2%. First-quarter GDP data showed the economy has contracted 2.6% – more than expected â€“ following a 3% fall in the […] tourism numbers are due shortly. South Africaâ€™s rand slips 0.5%
Indonesian rupiah gains after a credit rating upgrade.
*Upcoming events, data on Friday:
Australia private sector credit April Turkeyâ€™s central bank meets, publishes financial stability report US Q1 earnings: Dollar Tree, Gamestop NY Fed chief Williams speaks in NYC Sovereign credit rating reviews â€“ S&P Global: Ireland, Bahrain, Bulgaria, Leichtenstein/Moodyâ€™s: Latvia/Fitch: […]