• US President Trump ordered US Trade Representative to consider USD 100bln in additional China tariffs, which Trump said was in light of China’s unfair retaliation
• Asia equity markets traded somewhat indecisive as the region pondered over US trade policies. In FX, USD and CNH both softer
• Looking ahead, highlights include the US and Canadian jobs reports ECB’s Coeure, BoE’s Carney, Fed’s Powell and Williams

TRADE TARIFFS

US President Trump orders US Trade Representative to consider USD 100bln in additional China tariffs, which Trump said was in light of China’s unfair retaliation. (Newswires)

US Trade Representative Lighthizer said any further tariffs would not be effective until public comment process is completed, while a US senior official commented that the US is willing to negotiate trade with China, but only if it is serious as prior attempts have resulted in little progress. (Newswires)

Chinese state-run tabloid Global Times said the new tariff threat reflects arrogance on issues to China and that Trump’s administration is totally wrong about the nature of current US-China trade relations, while China’ official press agency Xinhua stated the US proposal of USD 100bln tariffs violates international trade regulations and that China keeps the door open regarding trade discussions with the US. (Xinhua/Global Times)

US Department of Agriculture Undersecretary Northey said the department will find ways to attempt to shield the sector from trade disputes with China. (Newswires)
ASIA

Asian equity markets traded somewhat indecisive as the region pondered over US trade policies in which recent efforts by US officials to ease trade concerns which helped Wall St notch a 3rd consecutive gain, was thwarted after President Trump ordered to consider an additional USD 100bln of tariffs against China. This latest announcement was in response to China’s retaliation and dragged US stock index futures, while pressure in ASX 200 (+0.1%) and Nikkei 225 (+0.1%) was contained and later reversed amid commodity sector strength in Australia and JPY weakness. KOSPI (-0.5%) was lower with index heavyweight Samsung Electronics failing to benefit from better than expected prelim. Q1 operating profit, as it also missed on revenue while some cited participants selling on the news and booking profits after the prior day’s rally. Elsewhere, mainland China remained shut and Hang Seng (+1.2%) bucked the trend to trade firmly higher as it played catch up to the gains during the holiday closure. Finally, 10yr JGBs were uneventful amid an indecisive risk tone in Japan and following a tepid Rinban announcement, with the BoJ in the market for just over JPY 600bln in up to 5yr JGBs.
UK/EU

UK Brexit negotiators are reportedly being urged to come up with a fresh proposal to break the deadlock regarding the Irish border amid ongoing discussions on the issue which are set to last several weeks. (Guardian)

Italy’s Five Star Movement leader Di Maio said that with their party in government, Italy will be allied with the EU, Monetary Union and NATO, while he also reiterated he proposes a Germany-style contract on coalition government with either the League or PD. (Newswires) However, Italy’s President Mattarella said consultations have not made any sign of a coalition deal and noted that new consultations will take place next week. (Newswires)

FX

USD and CNH both initially softened overnight as US-China trade war concerns resurfaced after President Trump responded to China’s retaliation with a possible USD 100bln of additional tariffs. This provided mild reprieve for the greenback’s major counterparts in which GBP/USD attempted to gain a firmer footing above the 1.4000 level, while the announcement also spurred some flows into safe-haven JPY. However, the pull-back in USD/JPY was limited as support held at 107.00 and currencies then returned flat in late trade amid tentativeness ahead of the key US NFP jobs data later.

SNB’s Maechler said that the CHF is still considered a safe haven and that an expansive policy is still needed. (Newswires)

SNB’s Moser said situation in currency market remains fragile, while he added that the SNB must stay alert and is ready to influence the currency market if needed. (Newswires)

COMMODITIES

Commodities were mostly subdued overnight in which WTI crude futures briefly slipped to below USD 63.00/bbl as markets were spooked by President Trump’s announcement of a possible USD 100bln of additional tariffs on China. Elsewhere, gold prices whipsawed after early safe-haven flows propped up the precious metal, which was then later pared as the greenback recovered and Asia risk sentiment somewhat improved, while copper was lacklustre on the trade fears and with its largest consumer closed for holiday.

US

US treasuries declined on Thursday as stocks continued their push higher seen throughout the last two trading days. Focus was again on comments from White House economic adviser Kudlow who played down fears of a full-blown trade war for the second consecutive day, calling the tariffs on China a negotiating tool. Treasuries had been lower from the off, before catching an early bid amid a chunky block buy prior to the CME open but resumed their decline at the CME open. IFR noted that volume was notably light ahead of today’s Nonfarm Payrolls report. T-Note futures (June 2018) settled down 8+ ticks at 120-18.

Fed’s Bostic (voter, dovish) said Fed should take a pause on hikes once the neutral rate is reached and that policy has a little way to go before reaching neutral rate, while he also commented that some asset markets are getting aggressively priced. (Newswires)

US President Trump said it’s time we did something on trade with China, while he also stated it is possible we will have something soon on NAFTA but can cancel it if needed. (Newswires)