Pro Perspectives 10/2/19

October 2, 2019

Global stocks took another slide today.  Noticeably, European stocks have taken the biggest hit, not just today, but over the past two days.   

On that note, the media's attention was given to the U.S. manufacturing data yesterday, to explain the shake up in global financial markets.  But was there something more?

It appears, maybe so. 

Today at 10pm EST, the headline hit that the World Trade Organization has sided against a longstanding United States complaint against the EU over subsidies that have been given to the European aircraft maker, AirBus, that have distorted global fair trade and competition — namely, anti-competitive to American aircraft maker, Boeing.  The U.S. estimated that the economic benefit of those subsidies, overtime, at more than $200 billion. 

Now, this headline sounds like an aggressive ramp in Trump trade aggression. 

But this was a complaint dating back to 2006
After more than a decade of hearings, and rounds of EU appeals, today, the final decision came down, and on the side of the complainant, the United States.  This decision awards the U.S. the right to sanction the $7.5 billion of EU imports related to the case. 

Bottom line:  The threats of action against EU subsidies have been floated by the Trump administration many times.  But now they have the WTO stamp of approval.  Comments from a U.S. treasury official hit the wires at the close of the stock market today, saying the U.S. has readied tariffs to retaliate against EU subsidies.  

With the above in mind, remember, the central banks have now positioned themselves specifically to absorb potential shocks and economic weakness from an indefinite trade war.  And this may prove to be the catalyst to move the ECB toward outright stock purchases.