April 4, 2018 / 1:58 PM / 23 days ago

INSTANT VIEW-China retaliates, slaps duties on U.S. soybeans, planes; markets skid

NEW YORK, April 4 (Reuters) - China hit back quickly on Wednesday against the Trump administration’s plans to impose tariffs on $50 billion in Chinese goods, retaliating with a list of similar duties on key U.S. imports including soybeans, planes, cars, beef and chemicals.

COMMENTS:

JACK ABLIN, CHIEF INVESTMENT OFFICER AT CRESSET WEALTH IN CHICAGO

“Now they are coming back targeting our largest exports. Futures seem to be eroding. Tariffs by themselves and an escalating trade war would certainly have deleterious effects on just about everything. Stripping it away, at least we are not in a frothy market situation, something where there is some vulnerability there. There are going to be a lot of companies not affected by tariffs, probably, and those earnings are going to be pretty good.

“One of the things is that analysts are actually raising their revenue and profit forecasts going into the (earnings) season, which is really kind of a reversal of what we have seen for years. If you take those numbers and project out for four quarters, I argue the market is about 7.5 percent undervalued relative to the next four quarter earnings if you just look at the cumulative growth.

“Obviously we need kind of a quiet period on these headlines and we need to focus on what is ultimately important and that is earnings. So I am hopeful over the next couple of weeks that earnings will be that shiny object that everyone can focus on.”

ADAM SARHAN, CHIEF EXECUTIVE OF 50 PARK INVESTMENTS IN NEW YORK

“The market is erring on the side of caution. The level of uncertainty has definitely surged. When you see China retaliate stronger than the U.S. that’s a very strong signal that they mean business.”

“Everybody knew they were going to retaliate. The question was how strong of a retaliation. Today’s move clearly shows that they mean business.”

“Today we’re close to testing important levels of support. If the market takes out February’s low, if all three indexes break below and close below that low that’s going to significantly change the landscape. It’ll show the intermediate term trend will have shifted to a bearish trend from a sideways trend.”

“Right now we’re clearly in correction territory. For the correction to end we have to get some certainty on this trade situation. If it escalates we’re going into a bear market. If it de-escalated the market’s moving higher. The only thing that matters now is certainty.”

“You don’t have to be fully invested. If this gets ugly and we get another 2008 style bear market everything goes down. If that happens, the safest place to be would be to be out of the market.”

“The market is very news dependent and a positive headline or a positive tweet could significantly change the dynamic. The market right now is desperate for clarity. Until we get that clarity we’ll have sideways to down action.”

If the U.S. responds to China or if more countries are dragged in he said: “This could very quickly get out of hand and cause a global recession. For now a defensive stance is warranted.”

RICHARD BENSON, CO-HEAD OF PORTFOLIO INVESTMENTS, MILLENNIUM GLOBAL INVESTMENT, LONDON:

“The impact on (the) financial market has not been that significant. So this has not really affected our portfolio allocation. We’ve done bits and pieces but there has been no massive shift. The net effect on U.S. GDP is just 0.3 percent of GDP, which is minimal. It could worsen, sure. If that materializes, then we could see a more pronounced sell-off in stocks. So we’re waiting for the next moves from both the U.S. and China.” MARKET REACTION:

STOCKS: Stocks were sharply lower, with the S&P opening down 1.3 percent. BONDS: Benchmark 10-year note prices gained 5/32 in price to yield 2.726 percent, down from 2.783 percent on Tuesday.

FOREX: The dollar nudged lower, down 0.2 percent.

Americas Economics and Markets Desk; +1-646 223-6300

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