Briefing highlights
- U.S.-China trade talks resume
- Stocks, loonie, oil at a glance
- Canada churns out new jobs
- Unemployment rate dips
- Required Reading
Trade talks resume
This could be a crucial day for markets as American and Chinese negotiators meet amid an escalation of their trade war.
Having been buffeted by the twists and turns of the U.S.-China tariff battle, markets are taking the latest developments in stride so far this morning.
To recap the latest: The U.S. increased duties, to 25 per cent from 10 per cent, on US$200-billion of Chinese goods even as key officials meet in Washington, trying to strike an elusive trade deal.
China said it would retaliate, but stopped short of unveiling any measures.
President Donald Trump eased concerns, saying he had received a “beautiful letter” from Chinese leader Xi Jinping, which could be followed by a phone conversation.
Markets are mixed so far.
“The market’s reaction has not been all doom and gloom,” said Jasper Lawler, London Capital Group’s head of research.
“We are not seeing see the same risk-off reaction that we have seen in previous sessions,” he added.
“The fact that the two sides have agreed to continue negotiations on Friday is offering a glimmer of hope that the relationship between the two powers hasn’t deteriorated beyond repair. Markets are also clinging to Trump’s comments over a ‘beautiful letter’ … and an expected phone conversation between the two leaders.”
One of the interesting things here is that the market volatility of late is coming not just from the Trump administration’s actions, but, as we’ve seen in the past, what Mr. Trump says and tweets. Which means today could be volatile.
“Traders continue to swing from tweet to headline to comment to tweet as they try to make sense of the mixed messages,” Mr. Lawler said.
“Global stocks are heading for the worst week in since December and 10-year U.S. Treasury yields dropped below the three-month yields, the first inversion of the yield curve since March.”
Sue Trinh, Royal Bank of Canada’s head of Asia foreign exchange strategy in Hong Kong, agreed markets took the tariff hike in stride, adding that “the panic selling that dominated for much of the week seems to have run into a bit of profit-taking and seller fatigue.”
London Capital Group’s Mr. Lawler said he expects no deal today and that “the best we can hope for” is an agreement to continue negotiaions.
“But with tariffs now at 25 per cent, both sides will want to see things progress more quickly,” he said.
“Let’s not forget higher tariffs on Chinese imports will get passed on to the U.S. consumer, who will end up paying more. This is not the legacy that Trump is after, he will want to see the China deal tied up quickly before U.S. economic data take a hit.”
Read more
- China vows to strike back as Trump’s tariff hike on Chinese goods takes effect
- Trudeau, Trump discuss relations with China as trade tension plays out
- Market strife looms if no one blinks in U.S.-China trade clash
Markets at a glance
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Jobs surge, unemployment dips
The economy created about 107,000 new jobs in April, with unemployment dipping to 5.7 per cent from 5.8 per cent a month earlier, Statistics Canada said today.
Among other things, the federal agency cited “notable gains in part-time work for youth.”
It’s worth keeping in mind that analysts note the volatility in these monthly reports.
“Suddenly a lot of Canadian young people decided that they needed to work, and they helped power a massive surge in employment in April if today's data are to be taken at face value,” said CIBC World Markets chief economist Avery Shenfeld.
Over the course of a year, employment is now up 2.3 per cent, or by 426,000 positions, Statistics Canada said.
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Ticker
U.S. consumer prices rise
From Reuters: U.S. consumer prices rose moderately in April and underlying inflation remained muted, suggesting the Federal Reserve could keep interest rates unchanged for a while.
Second Cup names CEO
From The Canadian Press: The Second Cup Ltd. says chief executive Garry Macdonald plans to retire at the end of the month, and that Steve Pelton, who co-founded the Landing Restaurants, has been appointed to succeed him.
Required Reading
Ontario to gain
Ontario will gain an extra $13-million a year after Hydro One raises its dividend payment, Andrew Willis writes.
Péladeau eyes Transat
Pierre Karl Péladeau is weighing a bid for Transat A.T. Inc., joining several other local buyers expressing interest in the struggling holiday travel company, Nicolas Van Praet reports.
What Canada should learn
Until recently, the name of the game in Ottawa was avoiding giving offence to Beijing, in the hope that corporate Canada would be rewarded. After Meng and canola, the game has changed. Read our editorial.