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Trade War Goes Hot

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As the trade war goes hot the Chinese retaliated with tariffs of their own and Russia applied tariffs as well. Trump of course promptly threatened the Chinese with even more tariffs. It will be interesting to see what type of hit the economic data takes going forward, it definitely won’t be positive. The major averages enter the final hour with solid gains, on decent economic data apparently believing that trade wars are good for business and profits, never mind historical experience. Additionally rapidly decreasing liquidity with the US, Japan and Europe either actively reducing quantitative easing or announcing the imminent beginning of, in an environment featuring higher interest rates and record debt is a virtual guarantee of economic and financial crisis. Something more than a few emerging markets are already seeing first hand. Since Monday the NASDAQ is up 230 points or 3.1%, while the Standard and Poors 500 Index has increased 64 points or 2.4%.

The Bureau of Labor Statistics June employment report gained a slightly better than expected 213,000 jobs. The unemployment rate increased to 4%, driven higher by a .2% gain in the Labor Force participation Rate to 62.9%. Average weekly hours were unchanged at 34.5 while average hourly earnings gained .2%. May and April were revised higher by a combined 37,000 jobs. Another decent but not great employment report.

The trade deficit slipped 6.5% to 43.1 billion in May. Imports increased to 258.4 billion while exports advanced to 215.3 billion. Once again tariffs distorted trade flows with the various actors trying to get ahead of their implementation.

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