Articles

At least it shows he cares about the stock market, though that’s hard to correlate with a 5.3% drop in the Nasdaq today.

This article was written by Adam Button at www.forexlive.com.

Comments from Cook:

• Sees growth slowing, inflation progress to stall on tariffs
• Sees more emphasis on upside inflation risks
• Appropriate to maintain current policy for now while watching data
• Now is time for Fed to be patient but attentive
• Fed policy is well positioned to respond to changes in the economy
• Inflation data already showing impact of tariffs
• Is watching for evidence tariffs driving persistent increase in price pressures
• Uncertainty heightened by economic outlook, government policy shifts
• Is watching for evidence for trouble on longer-term inflation expectations
• Reduced uncertainty, easing inflation would facilitate rate cuts
• Economy has entered a period of uncertainty

There is a hawkish bent to these comments. I fear the same from Powell, who speaks at 11:25 pm ET on Friday.

This article was written by Adam Button at www.forexlive.com.

French president Macron is on the wires.

• Calls on all big European businesses to freeze all investments in the US in retaliation for brutal and unjustified import duties imposed by Pres. Trump
• it’s important that all investment, plan or already announced, should be suspended until we have clarified things with the US.
• Macrons warns of massive EU retaliation sector by sector by the end of the month.
• It is the American economy which will suffer the most
• But added that almost every sector of the French economy could be damaged

This article was written by Greg Michalowski at www.forexlive.com.

The bloc had been expected to raise oil output in May by around 135k bpd. However, the agreement now is that they will be going with that alongside two additional monthly increments. That means the production adjustment in May will be roughly 411k bpd. That perhaps explains why the ministers were meeting for two hours.

OPEC+ will next meet again on 5 May to decide on June production levels.

This article was written by Justin Low at www.forexlive.com.

Momma needs a new pair of shoes, but they will probably cost a lot more.

Looking at all the prices of the stocks of major shoe manufacturers like Nike, Puma, Adidas, Deckers, Crox, UnderArmour, On Holding. Add in Lulu and Footlocker, you are seeing big price declines.

All are exposed to the tariffs with manufacturing in places like China, and Vietnam, countries that have some of the highest tariffs. Below is a snapshot of their price action:

• Nike – $57.75 ▼ $7.21 / -11.10%

• Adidas – $196.20 ▼ $22.90 / -10.45%

• Puma – $2.00 ▼ $0.20 / -9.09%

• Skechers – $48.61 ▼ $10.42 / -17.65%

• Deckers – $101.23 ▼ $16.75 / -14.20%

• Crocs – $95.27 ▼ $16.27 / -14.59%

• Foot Locker – $12.55 ▼ $2.17 / -14.74%

• Lululemon – $250.41 ▼ $32.34 / -11.44%

• Under Armour – $5.09 ▼ $1.21 / -19.21%

• On Holding – -$ 38.79 -$6.15 / -13.60%

The question for each is who eats the cost of the tariffs? If it is the consumer, the companies demand will likely move lower as the prices will price out many. If the company does, it takes straight from the bottom lines and profit margins. There is no good result.

Another ancillary issue revolves around theft. In a recent article on Business Insider, it was reported that Burlington Northern Santa Fe (BNSF), owned by Warren Buffett’s Berkshire Hathaway, has experienced a surge in train robberies since 2023, particularly in the southwestern United States. Thieves, reportedly linked to the Sinaloa Cartel, have stolen over $4 million worth of merchandise, including high-end sneakers and electronics. Their methods involve identifying high-security containers on eastbound trains, breaking into them using tools like saws and bolt cutters, and forcing emergency stops by cutting brake lines. Recovered stolen goods include unreleased Nike sneakers and gaming headsets. Despite arrests and collaboration with law enforcement, these thefts persist, contributing to significant financial losses in the rail industry.

This article was written by Greg Michalowski at www.forexlive.com.

Eyes are on the yuan for a potential devaluation as a way to retaliate against US tariffs. It’s a major risk that Deutsche Bank has highlighted, with 7.30 as a line in the sand.

WSJ China correspondent Lingling Wei writes:

Financial officials in Beijing may be positive on deval — which would free up some room for domestic easing. But the top Leaderships is not. For now.

That’s a bit of a coded message and a threat I suspect.

This article was written by Adam Button at www.forexlive.com.

Canada was one of the ‘winners’ yesterday but that ignores auto tariffs, steel, aluminum and products not covered under USMCA. So while the news could have been worse, there is still plenty of pain to come.

With that in mind, Carney isn’t in the mood to back down:

• Canada will impose 25% tariffs on all vehicles imported from the US that are not compliant with USMCA
• Will develop framework for auto producers to avoid counter-tariffs, as long as they maintain their production and investment in Canada
• Tariffs will not affect auto parts and will not affect vehicle content from Mexico
• Every single dollar raised — about $8 billion — will go to auto workers and affected companies

The bolded part is an interesting strategy. It’s a threat to hit companies who move factories out of Canada and into the US.

This article was written by Adam Button at www.forexlive.com.

Deutsche Bank is out with a note today that’s getting attention. It highlights the drop in the US dollar across the board in the aftermath of the US tariff announcements.

They highlight that the calculation of US tariff rates is particularly problematic, something I also wrote about. This is a diplomatic way of saying ‘the clowns are running the circus’:

There is a very large disconnect between
communication in recent weeks of an in-depth policy assessment of bilateral
trade relationships with different countries versus the reality of the policy
outcome. We worry this risks lowering the policy credibility of the
administration on a forward-looking basis. The market may question the extent
to which a sufficiently structured planning process for major economic
decisions is taking place. After all, this is the biggest
trade policy shift from the US in a century

They make one other great point in that other countries can’t negotiate with this. The high numbers on countries with virtually no tariffs or barriers leave no room for negotiations. What’s the ask for a country that already has no tariffs or minimal tariffs?

Looking ahead, DB remains bearish on the dollar and is now looking at the growth implications:

We argued that a sharp
retaliatory move
higher in USD/CNY is the most material risk to a dollar bearish view.
Outside of that however, we are squarely focused on the market’s perception of
the relative
growth and fiscal policy outlook between the US and rest of the world
and broader perception of relative policy credibility. Our assessment of the
newsflow so far is dollar bearish. The policy reaction from China and
Europe in coming weeks will be critical in an ongoing assessment of this view.

This article was written by Adam Button at www.forexlive.com.

• All instruments are on the table to respond
• Perceived trade imbalances do not take into account digital services
• Indirect consequences of tariffs may lead other countries in Asia to boost exports to Europe
• The US economy and consumers will become poorer and weaker
• We will react in organised and unified manner
• Response to Wednesday’s announcement of US tariffs will be more massive than previous response
• If Europeans work together in their response to US tariffs, we will succeed in dismantling US tariffs
• Europe must react to tariffs industry by industry
  US diagnosis is correct but tariffs are wrong answer, Western economies need to be more productive
• Decarbonisation of economy will contribute to reducing Europe trade deficit

The goal here appears to be ‘dismantling’ tariffs but I’m not sure that’s a possibility anymore.

This article was written by Adam Button at www.forexlive.com.

CNBC’s Megan Cassella was talking about tariffs and indicated that the messaging from the White House is that there won’t be negotiations on tariffs. The line from the top is that ‘countries had 70 years to negotiate’.

I think she is basing this on comments that have been on CNN and elsewhere but it’s a troubling development if true. It argues that these tariffs aren’t going away, even if other countries drop their tariffs. She specifically mentioned Israel, which dropped all US tariffs to zero earlier this week and still got a 17% rate.

This article was written by Adam Button at www.forexlive.com.

• Prior was 53.5

Data:

• Employment 46.2 vs 53.9 prior
• New orders 50.4 vs 52.2 prior
• Prices paid 60.9 vs 62.6 prior
• Business activity 55.9 vs 54.4 prior
• Supplier deliveries 50.6 vs 53.4 prior
• Inventories 50.3 vs 50.6 prior
• Backlog of orders 47.4 vs 51.7 prior
• New export orders 45.8 vs 52.1 prior
• Imports 52.6 vs 49.6 prior
• Inventory sentiment 56.6 vs 54.7 prior

Comments in the report:

• “Restaurant sales and traffic have improved in the past month
  overall. Valentine’s Day typically starts an improved seasonal trend
  that was consistent this year. We remain optimistic about the coming
  months, despite recent news of possible recession and tariffs that have
  not played out yet.” [Accommodation & Food Services]
• “Starting to see effect of aluminum tariff. These costs will be passed on to customers.” [Construction]
• “Patient volumes continue to exceed forecast, leading to increased
  revenues and an improved financial outlook. Supply chains continue to
  operate effectively and few categories — including IV solutions — are
  showing signs of duress. Labor outlook is improving, with reliance on
  travel staff continuing to recede. Outlook for the duration of the
  quarter is favorable.” [Health Care & Social Assistance]
• “The tariffs have caused issues in the groundwood paper market
  especially. With a large amount of groundwood imported from Canada to
  the U.S., the tariffs and resulting delays have caused havoc with the
  supply chain and deliveries. U.S. mills are getting backlogged and late
  from the additional tonnage they’ve taken on.” [Information]
• “New equipment purchases have slowed down over the last month due to
  the uncertainty of the new administration and cancellation of certain
  aspects of the Inflation Reduction Act.” [Other Services]
• “We are seeing some loosening in the U.S. economy related to hiring
  and people retention. Quality candidates are available, and employee
  turnover is decreasing. Competitive pressure for goods and services is
  increasing as suppliers seek organic increases in revenue.”
  [Professional, Scientific & Technical Services]
• “Government budget cuts and layoffs are negatively impacting our operations.” [Public Administration]
• “We are still holding back some money for emergency use in case the
  new administration targets grant usage and puts a hold on current
  spending.” [Transportation & Warehousing]
• “We’re expecting price increases in the near future due to tariffs
  on several commodity-based contracts, including waterworks items.”
  [Utilities]
• “Tariff confusion and the variety of ways that suppliers are
  responding have had a strong effect on our purchasing decisions this
  month, causing us to shift spend and in some cases buy in advance of
  reported tariffs.” [Wholesale Trade]

This article was written by Adam Button at www.forexlive.com.

• Prelim was 54.3
• Prior was 51.0

The ISM services index is due at the top of the hour.

This article was written by Adam Button at www.forexlive.com.