President Trump’s tariff increase went into effect as expected at 12:01 AM ET. Chinese goods that left ports before May 10 are not subject to the increase, thus providing a roughly small two-week window that could provide added incentive for a deal to be finalized. Chinese have yet to announce retaliatory measures, but that is expected anytime now. The ending of the trade truce will likely continue to weigh on global growth concerns. The longer it takes for a deal the worse off the two world’s largest economies will be. The chances of a deal being reached are still more likely than not.
Global Stocks – Asian shares rally on Chinese state fund purchases RBA – Cut growth outlook Oil – Geopolitical risks provide safety net on trade worries Gold- Poised for a weekly gain on tariff bump Rand – Ramaphosa’s victory sets up reform push Lira – Turkish Bank’s sell dollars overnight
Global stocks
Immediately following the tariff increase, Chinese backed funds were active purchasing Chinese equities. This would be the second time this week state funds have come into try to stabilize the Shanghai’s biggest fall in three years. Expectations are also growing that China will ease monetary and fiscal policies along with credit as markets price in the effect of higher tariffs. European bourses all rose on optimism a deal will get done. U.S. stocks are poised to open lower, coming off from a higher base and still repricing the risks to confidence.
RBA The Statement of Monetary Policy showed the RBA could cut rates if we do not see the unemployment rate fall. The RBA downgraded growth forecasts and is pricing in 50 basis points of cuts, one for this year and next. The outlook for China remains a big uncertainty and the bank will likely adopt an easing bias quickly if their biggest trading partner sees the downside risks grow. 
Oil
Crude prices appear to supported on both tighter supply and geopolitical risks. The escalation in the trade war has put a return in global growth worries, which would translate to softer crude demand. Optimism is still greater for a deal to get done soon, than for talks to fall apart, so the trade story could shortly become a tailwind for crude. Crude prices should see some support from Iranian tensions and supply risks from Libya and Venezuela.
Gold
The yellow metal appears poised for a weekly gain as U.S. tariffs on Chinese goods were raise shortly after the stroke of midnight. Gold’s loss of safe-haven appeal should return if talks see a complete collapse, but that remains the least likely scenario.
Rand
With 80% of the vote in, the ANC appears poised to win a diminished majority with 57% of the vote, down from 62% in the vote in 2014. Led by President Cyril Ramaphosa appears set to continue to try to clean up corruption and push forward with major reforms. The final tally is not expected until the weekend when more remote areas take time to come in. The rand is firmer for a fourth consecutive day as an ANC victory, albeit a small one was the most market friendly outcome. 
Lira
One of the best trades of the year has been shorting the lira. The political situation in Turkey is messy at the very least and the threat to democracy is a real risk. The last leg of lira weakness stemmed from President Erdogan’s decision to have a rerun of municipal vote in Istanbul. Overnight, Turkish banks sold dollars during illiquid times to maximize the effect to try to put a dent into some of this year’s losses.
