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— This is the script of CNBC's news report for China's CCTV on July 6, 2018, Friday.
In the overnight market, due to the "zero-tariff solution" proposed by the United States, the stock prices of auto companies in the European and US stock exchanges have risen. On the European side, Volkswagen closed up more than 4 percent, BMW Motors rose 3.72 percent, and Daimler rose 3.76 percent. These companies are the three major car companies in Germany. In the US stock market, the three major auto companies, Fiat-Chrysler rose 5.8 percent, Ford slightly grew more than 0.5 percent, and General Motors General Motors closed up more than 1.28 percent. t can be seen that the trade conflict between Europe and the United States has eased, and the bilateral financial markets have been relieved.
We know that since the export of German car companies accounts for more than 20% of global auto exports, any tariff adjustment will directly affect the economic prospects of Europe. Similarly, US auto exports accounted for 7.2 percent of the world's total, ranking third after Japan. And if the EU and the United States reach an agreement to implement a bilateral zero-tariff solution, then it is undoubtedly very good news for American car companies, because they currently face 10% tariffs in the EU market, and the tariff rate of EU cars entering the US market is only 2.5%.
Jeremy Klein, chief securities analyst from FBN, told CNBC that the current financial market has already priced the worst case of trade conflicts between Europe and the United States, so any new news is either positive or medium for the market. Now, the auto sector is awaiting further consultations between Europe and the United States to confirm the feasibility of bilateral zero tariffs.
In the overall US stock market, the Dow Jones Industrial Average increased 0.75%, the S&P 500 index was up 0.86%, and the Nasdaq Composite Index rose 1.12%, indicating a rebound in the technology sector.
In addition, the events that the market focused on overnight, as well as the notes of the last monetary policy announced by the Federal Reserve. The notes of the meeting showed that Fed officials generally believe that: First, it is still too early to completely eliminate the concerns of weak inflation, but the price trend supports the prospect of 2% inflation. Second, the Fed needs to gradually raise interest rates in the context of a strong economy, and may allow the Fed's federal funds rate to be higher than the neutral level next year. .Third, most officials have noted that the risks surrounding trade policy are growing, and this poses a downside risk to US economic growth and inflation and that is worrying. This shows that although the Fed is paying close attention to trade frictions, there is no indication that this concern will drag the Fed’s rate hike.
[Joseph Capurso, Director, Internatinoal Economics] "The Fed seems quite intense on the hiking rates twice more this year. That's certainly the message I got at the FOMC notes today. Really, the question for the market is, how many times they are gonna hike next year."
After the Fed’s meeting notes were announced, the probability of the Federal Fund’s interest rate futures hike again in September this year is forecast at 78 percent, indicating that the market expects the Fed to raise interest rates twice before March next year. The published notes are also in line with previous market expectations.