MORE MARKET PAIN LOOMS AS TRUMP KEEPS THE WORLD GUESSING
THE TRADE war just ratcheted up another notch and the outlook for Chinese manufacturing deteriorated further, signalling the caution that characterised a tumultuous August for global markets may have further to run. The ground is laid for a volatile start to September, exacerbated by the US Labor Day holiday today crimping trading volume with treasuries and equity markets shut. In the Asia Pacific, all eyes will be on shares of Apple suppliers and clothing manufacturers to gauge the reception to this latest round of tariff hikes. “This is the mother of all questions: Is Mr Trump going to escalate or de-escalate over the next year?” Luciano Jannelli, head of investment strategy at Abu Dhabi Commercial Bank, told Bloomberg TV yesterday. “It’s difficult to say.” The US implemented 15 percent tariffs on about $110 billion (R1.67 trillion) in apparel, footwear and other Chinese imports yesterday. Face-toface talks between US and Chinese trade negotiators scheduled for Washington this month were still on track, President Donald Trump assured on Friday. According to estimates, Chinese exports of shoes and clothing to the US could drop by more than 3% year-on-year in the second half of this year as a result of the tariffs. “The tensions will escalate and… the clashes in Hong Kong (may) further complicate any discussion between the Trump administration and the Chinese Communist Party,” said Rainer Michael Preiss, a portfolio strategist at Taurus Wealth Advisors. Data on Saturday showed the manufacturing sector of the world’s second-largest economy remains under pressure. China’s purchasing managers’ index dropped to 49.5, marking it the fourth consecutive month of contraction in factory output. The latest tariffs that came into effect yesterday were widely anticipated and may already be reflected in market prices. “The market expected the tariffs to kick in,” said Kerry Goh, of Kamet Capital Partners, a Singapore-based multifamily office. “I don’t think there will be a big move on Monday (today).” For Jingyi Pan, a strategist at IG Asia, it remained prudent to play defensive. “It does appear that the disagreements between the two sides will drag on with negotiations yet to lead to any way out of the current gridlock,” she said. Here are a few areas to monitor in trading on Monday: the new duties will hit Apple products that made up at least 10% of sales in the company’s 2018 fiscal year, such as the Apple Watch, AirPods and iMac computers, according to analysis. Shares of Foxconn Technology Group, the US company’s main assembly partner, and Luxshare Precision Industry, which provides components for wearable devices such as the Apple Watch, could be volatile in trading today, warned Taurus Wealth’s Preiss. A more than 7 percent surge for gold in the past month may have further to go after ending last month at about $1 520 an ounce. | Bloomberg