China trade data precedes weekend tariff negotiations

• DAX hits fresh record high.
• China trade data precedes weekend tariff negotiations.
• Canadian jobs in focus.

European equities are on the rise once again today, with the DAX pushing through 23500 to hit a fresh record high. Coming hot on the heels of yesterday’s UK-US trade deal, there is an air of optimism that we could see additional deals come to fruition around the globe. The immediate attention will be on US-China discussions, but other US ‘allies’ will hope that they can get to the front of the line to strike a deal that mitigates the negative effects of Trump’s policies. One downside to the UK deal is the fact that the 10% tariff has remained in place, highlighting that this is likely to be a global tariff that remains in place irrespective of any deal struck.

Sentiment in China has been under the microscope in anticipation of the high-level tariff talks set to talk place in Switzerland this weekend. There has been some murmurs that Trump is willing to drop tariffs back down to 50%, but huge uncertainty remains over exactly what a deal looks like, and what markets perceive as a good deal. After-all, a 50% tariff on all goods from China will be a big problem for a huge swathe of US businesses reliant on imports from the Asian manufacturing hub. Notably, we have seen better-than-expected trade data out of China for the month of April, with both exports (8.1%) and imports (-0.2%) confounding calls for a collapse after last month’s pre-tariff 12.4% export bump. Notably, China have seen success growing exports to the likes of Japan (7.8%), Taiwan (15.5%), Australia (5.8%), the EU (8.3%), and ASEAN (20.8%). However, we are already seeing US demand fall off a cliff, dropping to -21.0% in April.

Looking ahead, the Canadian jobs report provides yet another gauge of how economies around the world are being impacted by Trump’s policies, with markets expecting to see unemployment rise and earnings growth decline (3%). The UK trade deal may have provided the basis for others to hope that their automotive sector interests can be ringfenced, but questions remain over whether that will still be the case for countries closer to the US border.