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Equities edge up despite rocky G7 meeting

President Trump left the G7 meeting in Quebec without backing an agreement to reduce barriers to trade and tariffs. 

Earlier in the summit, Mr Trump announced that the group should promote tariff-free trading. Looking back at that statement, it seems that Mr Trump wants other countries to cut their tariffs on US goods. The US President even threatened to stop trading with countries that don’t lower their tariffs on US goods. Germany’s Angela Merkel confirmed the EU will hit back at Washington’s decision to impose levies on steel and aluminium from Europe.

Relations between the US and Canada have deteriorated a little as Mr Trump called Prime Minister Justin Trudeau ‘dishonest and weak’. Mr Trudeau talked about how the two countries fought alongside each other over the years, but that didn’t pull any sway with the US President. Canada imposes tariffs of 270% on certain US dairy products, and Mr Trump was quick to point this out.

Trade negotiations take time and Mr Trump will probably let the other G7 members stew in this for a while, and await a response. Compromise is required from all parties, and for the time being it appears that Donald Trump has dug his heels in.

The US President left the G7 summit early in order to prepare for his meeting with Kim Jong Un, the North Korean leader. The meeting will take place today in Singapore. There has been a bit of toing and froing about the meeting, but now it seems as if it is finally going ahead. Last summer there were some volatile sessions on global stock markets on account of the heightened tensions between the US and North Korea because of the regime’s nuclear weapons programme. The meeting between the two leaders could greatly improve political relations around the world.

Over the weekend China released the latest CPI and PPI data. The inflation rate held steady at 1.8%, meeting expectations, while PPI rose from 3.4% to 4.1% - a four-month high. The firm PPI rate could point to higher CPI in the months to come as manufacturers are likely to pass on their costs.

At 9am (UK time) Italy will release the latest industrial production data, and the consensus estimate is for a decline of 0.6%. Keep in mind last week Germany and France announced declines in

industrial production of 1% and 0.5% respectively. The currency bloc is going through an economic soft patch. Despite the underwhelming data from the region, the European Central Bank (ECB) might wind down their bond buying scheme this year. Jens Weidmann of the ECB confirmed it was ‘plausible’ the stimulus package could be brought to an end in 2018. The ECB don’t always deliver on their promises, but they should be listened to nonetheless.

The UK manufacturing production, industrial production, goods trade balance and construction output will be reported at 9.30am (UK time). The goods trade deficit is anticipated to decline to £11 3 billion, from £12.29 billion. The trade detail will be interesting in light of the G7 meeting. The construction output is tipped to rebound from -2.3% in March to 2% in April. The construction PMI reports for April and May were firmly in positive territory after the negative reading in March.

EUR/USD – has been pushing higher for over a week, and if 1.1830 is cleared, it might pave the way for 1.2000 to be tested. Support might be found at 1.1700, and a break below it might bring 1.1617 into play.

GBP/USD – is continuing its bounce back, and if it moves above 1.3450, it could target 1.3592 – the 200-day moving average. A move lower might encounter support at 1.3300, and a break below it might put 1.3204 on the radar. 

EUR/GBP – has been broadly moving higher since April, and if it clears 0.8840 – 200-day moving average, it might target 0.8900. Beyond that, bulls might look to 0.8970. Support might be found at 0.8725.

USD/JPY – has been in an upward trend since mid-March, and if it can clear 110.17 – 200-day moving average, it might target 111.39. Support might be found at 108.83 – 50-day moving average. 

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