Today, the biggest news in the financial markets came from China, which announced a fresh $50 billion tariffs on the United States goods. The new tariffs targeted critical items such as motor vehicles, airplanes, and soybeans among others. This comes a day after the United States released the list of the items it will place tariffs on. As a result, the global financial markets are trading significantly lower with the Dow Futures falling by more than 500 points.
Meanwhile, the Eurostat today released the inflation data for the European Union countries. The CPI rose to 1.4%, up from 1.1% last month while the core CPI remained at 1.0%. This was lower from the 1.1% the traders were expecting. According to the report, the main components: food, alcohol, and tobacco) had the highest rate of growth at 2.2% compared with the 1.0% rise in February. This was followed by energy, which rose by 2.0% compared to 2.1% in February, while services grew by 1.5%. Non-energy industrial goods slowed to 0.2% compared to 0.6% in February.
At the same time, Eurostat released the unemployment data that showed that the euro area unemployment rate fell to 8.5% from last month’s 8.6%. That of the EU member countries was at 7.1%, which was lower than the 7.2% reported a month ago. In the region, Czech Republic, Germany, and Malta had the lowest unemployment rate at 2.4%, and 3.5% respectively while Greece and Spain had the highest rate at 20.8% and 16.1% respectively. The data is an improvement from the same period last year expect for Estonia where the employment numbers deteriorated. The most improved countries were Cyprus, Greece, and Croatia which improved by 3%, 2.6%, and 2.4% respectively.
Following the data, the Euro index, which tracks the euro against the major currencies continued its slide as shown below. It was little moved against the dollar. It rose by 0.25% against the pound and fell by 0.30% against the yen.
Later today, we will receive the monthly employment numbers from Automatic Data Processing (ADP). This is the biggest payroll company in the United States. Using its statistics, it will show us the number of jobs added in the month of February. Traders expect the number to show that 208K people were employed compared to last month’s 235K.
However, this number is not always in line with the government numbers. Last month, after reporting that the economy added 235K jobs, the official data showed that the economy had created more than 300K jobs.
This Friday, the Bureau of Labor Statistics will release its official employment numbers. Investors expect the data to show that the economy added 195K jobs, with the unemployment rate falling to 4.0%.
While all these numbers are important, the key theme going forward will be the trade war. Traders will be thinking about the end game of the war that has officially started today. Will the war lead to more inflation? Will China start using the tools at its disposal like stopping to buy U.S. debt? Will it start punishing American companies operating in China? Will it add more items on its list of tariffs? These are the questions most investors will be asking going forward.