China targets FedEx, claims US sabotage

China targets FedEx, claims US sabotage


Global markets are reeling this morning from Friday’s sell-off following US President Trump’s out-of-nowhere increased duties on Mexican imports. Perhaps signalling towards China, the US administration will impose progressively increasing tariffs as a punishment for Mexico’s failure to curb the flow of immigrants across the border. Mexico’s Economy Minister said she would meet with US officials to resolve the issues.

Deutsche Bank on Friday estimated that the cost of Trump’s trade wars to US equities so far is in the $5 trillion region over a 17-month period. Core inflation increased a tick in April for the first time this year, as initial jobless claims increased by 3k and Q1 GDP was downgraded a tenth to 3.1%.

Personal consumption also missed expectations, while personal income and expenditures increased beyond the consensus. In Canada, GDP increased to a half percent in March, but not sufficient to lift the YoY reading to the 0.7% target.


One main target for safe-haven flows following Friday’s equities bloodbath is the Yen, which shot up nearly 200 pips over the weekend, pushing the Nikkei down to a 4-month low.

Consumer inflation continues weak in Japan, with Retail Trade down to 0.5% in April – half the month before. On the other hand, industrial production grew by 0.6% MoM in April, lifting the yearly count to minus 1.2% from March’s -0.43%; and unemployment fell, for the first time in 2 months, a tenth to 2.4%.

As China’s retaliatory trade measures come into effect, this morning’s Caixin manufacturing PMI from the Markit Group shows the sector still expanding at 50.2 – certainly better than Friday’s NBS (from the China Federation of Logistics and Purchasing) reading of a contractionary 49.4 in May.

Services remain strong at 54.3. And, in what may signal the first of such steps, China has launched an investigation against FedEx, citing improper practices. The company is the first in a list of US companies China intends to take to task.

AP yesterday reported that China’s Cabinet Spokesman has blamed the US for the collapse of talks, showing in a public report that China has kept its word over 11 rounds of talks, while the US has continuously backtracked and introduced new tariffs and conditions as talks progress.

Meanwhile, impervious to tomorrow’s expected interest rate cut from the Reserve Bank of Australia, the AUD overnight added 50 cents on the dollar. Following the elections, a more expansionist policy is expected alongside more cuts.


After recovering from Theresa May’s resignation, the pound overnight bounced off support at 1.2550 Friday. However, with anti-EU PM contender Boris Johnson at the forefront, a no-deal Brexit is becoming a stronger option.

Consumer confidence Friday is still negative (-10), but better than April’s -13; mortgage approvals increased to 66.26K, but consumer credit missed expectations at £0.94bn.

Reuters this morning reports a marked drop in British manufacturing activity, as customers from across the EU and Asia begin to reject British goods on account of Brexit-threatened supply stability.

Elsewhere in the zone, policymakers have been expressing concern with weakening inflation (see ECB April minutes). Indeed, CPIs Friday show a marked retreat, down to 1.4% in Germany, with retail sales there contracting by 2% MoM in April.


Oil prices plunged over the weekend – performing a dead-cat’s bounce off $52 per barrel of WTI – an $8 loss. Not helping matters was Baker Hughes’ announcement of a 3-rig increase in active oil wells.

Taking up the risk-off slack, gold trading over the weekend added $35 per troy ounce, recovering over half its losses since prices started going south in late February.

And finally, Bitcoin, having added 120% over the past 3 months, rejected the 9K foothold and continues vacillating between 8800 and 8200.


Adding to Boeing’s woes, the FAA has given the company 10 days to repair wing components on over 300 aircraft that are prone to cracking – this as orders for competitor Airbus’ 320 Neo continue piling up.

Economic Calendar

Today’s Top Economic Events
07:15 GMT – Spain
07:45 – Italy
07:50 – France
07:55 – Germany
08:00 – EU
13:45 GMT – US
13:30 – Canada
Markit Manufacturing Purchasing Managers’ Index (May)
14:00 PM GMT – USISM Manufacturing PMI (May), Prices Paid (May) & Construction Spending (Apr)
23:01 PM GMT – UKBRC Like-For-Like Retail Sales (May)
01:30 AM GMT (+1) – AustraliaCurrent Account Balance (Q1), Retail Sales (Apr) & at 4:30, Rate Statement & Interest Rate Decision

For more, visit our Economic Calendar