GLOBAL MACRO: EU Response To Steel & Aluminium Tariffs Alone Likely Small [1/2/]
Feb-13 10:53
- US-EU trade tensions continue to bubble away even if they clearly haven’t reached the level of friction seen with Canada, Mexico and Canada.
- President Trump said last week that EU tariffs will “definitely happen” and has since announced 25% tariffs on steel & aluminium to be made effective Mar 12, although as we show these should have relatively little macro impact compared to other areas of EU trade.
- Yesterday, EU trade chief Sefcovic spoke with Lutnick, Trump’s pick to become commerce secretary, Jamieson Greer, his pick for US trade representative and NEC Director Hassett according to an EC spokesman. The call was introductory and the two sides agreed to meet soon.
- The EU earlier this week pledged to respond to the 25% tariff threat on steel & aluminium, having prepared multiple options depending on US policy, although there is nothing official yet.
- EU exports of iron/steel and aluminium to the US are small from a macro angle, summing to E16bn over the past twelve months of data for just ~0.1% of EU GDP. Trump has previously targeted the EU due to its trade surplus with the US, although the targeting specifically of iron/steel & aluminium doesn’t do much to change things here considering net exports also just 0.1% GDP.
- This should keep any potential European retaliation on the low side, despite Germany being the most exposed from a pure export of steel volumes angle. Retaliatory powder is more likely saved if greater attention starts to be placed on chemicals and related products (exports 1.1% GDP, net exports 0.6% GDP), broader machinery excluding vehicles and aircraft (exports 0.8% GDP, net exports 0.4% GDP) and vehicles themselves (exports 0.3% GDP, net exports 0.25% GDP) – see chart.
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FRANCE: PM Favours Renegotiation Over Suspension Of Pension Reform; Risks PS Ire
Jan-14 10:51
French media outlets reporting that PM Francois Bayrou has told parliamentary leaders of the gov't parties that he does not intend to announce a suspension of the 2023 pension reforms in his general policy speech to be delivered in the National Assembly at 1500CET (0900ET, 1400GMT). Le Monde reports Bayrou said he "wished to initiate a renegotiation of the pension reform[...], in order to reach an agreement by September 2025, the date on which the retirement age should normally be raised by three additional months."
- The centre-left Socialist Party (PS) has talked up a suspension of the reforms as its price for supporting the gov't in a post-speech censure vote, and indeed votes on the social security budget and state budget. The PS executive is set to meet at 1300CET (0700ET, 1200GMT), and it remains to be seen whether the party and its 66 deputies will back, abstain, or vote against the gov't come the probably Thursday 16 Jan censure vote.
- Should Bayrou's middle-ground approach on pension refrom fall short of PS demands then it remains to be seen whether the Bayrou gov't can last. Depending on the nature of censure motions - whether it is put forward by the gov't, far-left or far-right will impact support - should the left-wing New Popular Front alliance (in which the PS sits) and the far-right National Rally vote against Bayrou it would be enough to see the gov't defeated, risking further political paralysis.
OUTLOOK: Price Signal Summary - Bear Threat In S&P E-Minis Remains Present
Jan-14 10:51
- In the equity space, a bear threat in the S&P E-Minis contract remains present and the contract traded to a fresh short-term low on Monday. 5866.00, the Dec 20 low and a key short-term support, has been cleared. This strengthens a bearish theme and sights are on 5784.00, the Nov 4 low and an important short-term support. Initial pivot resistance is seen at 5991.72, the 50-day EMA.
- A bull cycle in the EUROSTOXX 50 futures contract remains intact and the latest pullback appears corrective. Initial support is at 4937.06, the 50-day EMA. It has been pierced, a clear break of this EMA would undermine a bullish theme and signal scope for a deeper retracement. For bulls, resistance at 5040.00, Dec 9 high, has recently been pierced. Clearance of it would resume the bull cycle that started on Nov 21 and open 5068.13, the 0.764 projection of the Nov 21 - Dec 9 - 20 price swing.
EQUITIES: Estoxx Synth Option trade
Jan-14 10:51
SX7E (17th Jan) 150, bought the call for 2.95 in 10.5k (100% del).
