In this report, I cover the early market action from London on Monday, May 6th, 2019. I look briefly at the precious metals, the stock market, the dollar, the bond market and the price of WTI and Brent crude oil.
Today I focus on the overnight headlines coming from the Trump administration and the Chinese government concerning the US/China trade negotiations or lack thereof. President Trump announced yesterday that he will raise existing tariffs from 10% to 25% as of next Friday and that he could impose more tariffs on another $325 billion of Chinese goods.
The major consequence of this announcement has been a big drop in the stock markets overnight as the major indices have dropped over 2% in the futures exchanges. China has also called off negotiations so it looks like a deal is very far away and a trade war much closer.
My conclusion is that the underlying problem with America's major trade and current account imbalances is that with its major reserve currency status and an irredeemable monetary world system other countries are forced to run a surplus with the US in order to accumulate fiat dollars and function in the world economy. Until the world gets back on a sound monetary system like a Gold Standard it will be very hard to find a solution to these imbalances.
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