Markets quiet with the US on holiday; no reaction to the court ruling that confirmed Trump's country tariffs imposed under emergency law were illegal. US equity futures and European equities up slightly. Global rates up slightly

Markets have begun the week on a very quiet note with the US closed for the Labour Day holiday.

There has been no market reaction to the federal appeals court ruling, after the close on Friday, that Trump had no legal authority to impose country tariffs under the International Emergency Economic Powers Act. The ruling is no surprise, and we said at the time of their imposition that the tariffs would be contested in court as there was no emergency to introduce them. The tariffs will remain for now and dragged out further in the courts, hence the market’s collective yawn at the decision.

On social media, Trump claimed a one-sided trade relationship between the US and India, noting “we sell them very little” and claimed “they now have offered to cut their tariffs to nothing”, following the US move to impose a 50% tariff on India (which covers only 55% of India’s exports to the US as the deal excludes electronics and pharmaceuticals).

If India was smarting from the 50% tariff, doubled last week as a penalty for buying Russian oil, there was no sign of that on display as it was hugs and hand holding all round at a summit between Modi, Putin and Xi in Shanghai. Modi said India and Russia share a special and privileged partnership, standing by each other in difficult times. Modi visited China for the first time in seven years, and political analysts noted that Trump’s policy actions had helped “reset” the relationship between India and China.

Turning to the markets, there have been small movements all round.  S&P500 futures were up less than 0.2% at the European close, while the Euro Stoxx 600 index rose 0.2%. 

US Treasury futures imply about a 1bp lift in the 10-year yield while UK and European 10-year bond yields rose 2-3bps.  The domestic rates market was quiet, with NZGB yields up 1-3bps and swap rates up 1-2bps, with marginally steeper curves.

In the week ahead the key focus will be on the US employment report on Friday night, which is a key risk event for financial markets and could have a bearing on how markets trade through the rest of September.  The nonfarm payrolls print is widely seen as the only real hurdle getting in the way of a September rate cut by the Fed.  The market sees payrolls rising 75k and the unemployment rate ticking up to 4.3%.  Stronger employment and a lower unemployment rate would add some uncertainty about the rate decision and challenge market pricing, where 22bps of rate cuts have been priced. A weak print would lock in a rate cut as a done deal and, if it is considerably weaker than expected, then the chance of a 50bps cut might well be priced.

Of the major currencies we focus on, none have moved more than 0.3% from their Friday close.  GBP is up 0.3% while the yen is 0.1% weaker, and that covers the range of movement.  The NZD has been hovering around 0.59, barely higher from last week’s close. The AUD is a touch stronger at 0.6550.

Gold and silver prices are hovering near record highs, seen as safe havens in an environment where investors are concerned about the direction of US policy, including threats to the independence of the Federal Reserve.  Meanwhile, Bitcoin’s allure as “digital gold” has faded a little, with the cryptocurrency trading around its lowest level in a month.

On the calendar today, NZ terms of trade and Australian current account data are released.  Euro area CPI and US ISM manufacturing data are released tonight. The former is expected to see annual inflation remaining unchanged at 2.0%, while the latter is expected to lift a point to 49, remaining in contractionary territory.