Trade War Concerns

Donald Trump sent another shockwave through markets, with an announcement of trade tariffs on aluminium and steel imports into the US. The action sparked angry protests from Canada and the EU, the largest exporters of steel to the US, and promises of retaliatory measures. The threat of a trade war between some of the world’s largest economies spooked equity markets, fearing a slowdown in global trade and the potential for slower productivity and GDP growth. The President remains convinced that the US will “win” any trade wars that he engages in. However, theory suggests that he will probably only do so on a relative basis, by hurting others more that he harms the US. Greater barriers to trade will bring inflationary forces to consumers and companies, adding to the growing list of concerns of central banks.

Murdoch Outbid

Rupert Murdoch’s 20th Century Fox has been outbid by US rival Comcast in its offer for UK broadcaster, Sky. The new bid of £12.50 per share was received well by markets, with the shares trading up to £13.73 on the expectation that a bidding war may result. A counterbid is yet to be received by Murdoch as he may be content to let a takeover by Comcast proceed at a good price, given the current sale of 20th Century Fox to Disney includes the firm’s 39% stake in Sky.  A counter offer may therefore be down to Disney’s desire to gain a distribution foothold in the UK and Europe and/or stop a rival from doing the same.

European Politics

Over the weekend, Italian voters went to the polls. This election has been closely watched, as a shock result in the EU’s third-largest economy has the ability to significantly disrupt. It was widely anticipated that the anti-establishment Five Star party would make significant gains, although it was not enough to secure a ruling majority. The resulting hung parliament was considered as the most favourable as it is unlikely to lead to a dramatic change of policy. Elsewhere, Angela Merkel has been able to secure a working coalition which will put an end to five months of rudderless politics in Germany. Stable leadership in Europe’s largest economy will hopefully begin to focus German attention outward once more and towards the ongoing Brexit negotiations with the UK.

Market Data