Daily Commentary

MarketMinder’s View: Looks like the US’s trade war with China may be de-escalating further. “China’s government is considering suspending its 125% tariff on some US imports, people familiar with the matter said, as the economic costs of the tit-for-tat trade war weigh heavily on certain industries. Authorities are considering removing the additional levies for medical equipment and some industrial chemicals like ethane, the people said, asking not to be identified discussing private deliberations. Officials are also discussing waiving the tariff for plane leases, the people said.” This follows the US’s own tariff exemptions and jawboning about broader cuts as the two sides pursue a deal. While most of this is talk, and talk is cheap, it illustrates a point we have made all month: Tariffs hurt the imposer more than the target, which creates incentives to climb down, lest officials on either side kneecap their own economy just to make a point. This is only part of why we think tariffs will have less of an impact than everyone fears and markets priced at the outset, but it is a key part. (Oh, and this piece names several companies, so we remind you MarketMinder doesn’t make individual security recommendations and those mentioned here serve only to illustrate the theme.)

MarketMinder’s View: This piece highlights a key thing investors will need to do as inflation and other data covering periods after “Liberation Day” will need to do: dig in and look at the details, not presume tariffs are responsible for every concerning report. Tokyo inflation, generally a leading indicator of Japanese inflation because it publishes a month earlier than the national report, accelerated this month. The core measure, which excludes fresh food, sped from 2.4% y/y in March to 3.4%, while the core-core measure, which also omits energy, jumped from 2.2% to 3.1%. Yet a lot of the headline rise stemmed from administrative factors: “The higher reading reflected a reduction in government subsidies to curb electricity and gas bills, as well as a series of price hikes for food that took place on April 1, the start of Japan’s new financial year.” As other coverage has noted, Japanese firms tend to assess prices twice annually, with hikes (or cuts) coming in April and October. So this isn’t a huge surprise, and it likely reflects extant, one-off pressures rather than tariffs. Keep an eye on things, but nothing here implies tariffs are suddenly biting, in our view.

MarketMinder’s View: Good news is good news, so feel free to cheer the UK’s 0.4% m/m jump in March retail sales volumes, which was broad-based and trounced expectations for an equivalent slide. However, we are inclined to agree with the analyst quoted in the article who pointed out that seasonal adjustments might have played a large role as the Office for National Statistics tries to smooth out distortions from Easter, which landed in late April this year. Unadjusted sales rose month-over-month and year-over-year, so we aren’t saying this is a bad report by any stretch of the imagination. But the big expectations beat could be more a function of analysts guessing wrong on how seasonal adjustments would play out than a surge of unexpected strength. We are still bullish on the UK, but it has much more to do with our belief reality will beat dreary expectations over the foreseeable future than with any single month’s retail sales results.