Here are five things you need to know this morning
Stocks look to open higher: Stock futures are indicating a rebound for North American equity markets as positive signals from initial U.S.-Japan trade talks are stirring optimism agreements can be reached to defuse the global trade war. U.S. President Donald Trump said there was “big progress” in talks to strike a deal for Japan. Sentiment is also being helped by an upbeat sales forecast from Taiwan Semiconductor, the world’s largest contract maker of microchips.
Trump slams Powell: Stocks sold off sharply yesterday afternoon after U.S. Federal Reserve Chair Jerome Powell warned that Trump’s tariff policies risked pushing inflation higher while weakening economic growth. Powell said policymakers needed more clarity before adjusting policy. This morning in a social media post the U.S. president said Powell’s termination from his position “can’t come fast enough”, arguing that the U.S. central bank should have lowered interest rates already this year, and in any case should do so now.
ECB cuts: The European Central Bank has lowered interest rates for the seventh time since last June as global trade tensions threaten to derail the region’s economic recovery. In its statement, the ECB said increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. Investors foresee two or three more rate cuts by the ECB before the year is out.
Bank of Canada on hold: Caution and uncertainty was also reflected in the words of Tiff Macklem yesterday, as the Bank of Canada held interest rates unchanged. The BoC put aside its usual central projection and instead presented two scenarios -- one relatively benign, another with escalating trade actions. Macklem emphasized the Bank is less forward-looking, but ready to act decisively. Analysts at Royal Bank note that while Governor Macklem repeated that the BoC would support the economy to the extent the inflation outlook allows, the bar to further rate cuts could be quite high… and there is a chance the BoC may not cut rates again this year.
Alcoa takes tariff hit: Alcoa says Trump’s 25 per cent tariff on metal imports has cost the company US$20 million since the duties went into effect. The largest U.S. aluminum producer incurred the costs on its imports from Canada. The disclosure is one of the first indications that U.S. companies are being adversely affected by the Trump administration’s trade war.
