Another high profile departure from the Trump administration and reports of a looming intellectual property trade war with China rattled markets overnight. Equities tumbled in Europe and the US and crude oil slid. A US inflation report bang in line with forecasts had little impact, and currency markets were surprisingly quiet.

President Trump’s twitter sacking of Secretary of State Rex Tillerson grabbed the headlines. Coming quickly after the departure of Gary Cohn there is an increasing perception of chaos at the highest levels of the US administration. However it was reports of the appointment of a US trade representative to investigate action against China over intellectual property rights that destroyed investor confidence. US $60 billion in tariffs on China electronics and telecoms may come as early as next week. If the reports are correct an economically damaging trade war could break out very soon.

Data due today could short circuit opening negativity. China industrial production (f/c + 6.2% ytd) and retail sales (f/c + 9.8% ytd) for February will speak to economic growth prospects. Rising internal demand may counterpoint external negatives for the Chinese economy. The Australia 200 index futures are down 34 points and market performance is likely hampered by a stubbornly strong, commodity inspired Australian dollar.

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