Daily Market Color

Tariff Tantrum Continues


US financial markets fluctuated with the continued rhetoric amongst government officials over President Trump’s plan to enforce tariffs on steel and aluminum imports.  While Trump continues to double-down on his pledge as he ensures no countries will be exempt from the taxes, today House Speaker Paul Ryan voiced his opposition to the plan.  It stands as one of the few instances where Ryan has separated himself from the views of the POTUS, stating that “we are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan. The new tax reform law has boosted the economy and we certainly don’t want to jeopardize those gains.”



Major US stock indices finished the day with gains after opening the week in the red, boosted by the sentiment that the future tariff implementation may not cause the severe trade wars initially envisioned.  The DJIA added 1.4%, the S&P 500 rose 1.1% and the Nasdaq increased 1%.  Treasurys yields/swap rates climbed marginally, finishing 1-2bps higher across the curve and pushing the 10-year note yield near 2.88%.  In the energy sector, WTI crude oil opened the week on a high note, gaining 2.2% on the day to $62.60/barrel.



Service Sector Stays Strong

An otherwise light day for key economic data reporting was headlined by the Institute for Supply Management’s index of nonmanufacturing activity, which displayed service sector growth in the US near a 10-year high during February.  The index recorded a 59.5 level, exceeding median forecasts of a 59.0, albeit a marginal decline from January’s 59.9 reading.  Steady upticks were observed in the business activity and production (+3 points) and new-orders (+2.1 points) components, helping to outweigh a steep drop-off in the employment index (-6.6 points), which declined to its lowest level in the past ten years.  Also noted in the report, growth was observed in 16 of 18 major industries.



European Elections Update

Two major developments ensued in the European political stratosphere this past weekend.  In Germany, Chancellor Angela Merkel and her Christian Democratic party had reason to celebrate on Sunday after the Social Democratic Party (SPD) voted in favor of supporting a Merkel-led coalition, effectively paving the way for her fourth term as chancellor.  The news provides a small sense of relief for investors in the EU’s largest economy, as Merkel will now be able move forward with policy development between Germany and France, helping to create a more unified European front.

Elections out of Italy provided a far less productive outcome, as anti-establishment groups managed to attract a large number of votes from citizens who have grown tired of the nation’s weak economic progress.  The two most prevalent groups in the election were the euroskeptic Five Star Movement and the anti-migrant League, whose populist approaches attracted a projected 360 of the 630 seats in the Lower House.  Currently, all signs point to a hung parliament in Italy, painting a bleak picture economic progress in the region.     

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