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International commerce was the hot topic this week.

Week in review: Nerves of steel

This week: Tussles over trade agreements and feline funnies.

International commerce was high on the agenda this week, in the form of tussles about trade agreements. In the U.S., the tariffs on steel and aluminum imports that President Trump announced last week were challenged by Canada and Mexico, the other members of the North American Free Trade Agreement.

Major U.S. corporations also put pressure on the U.S. president to reconsider. On Wednesday, Gary Cohn resigned from his position as Trump’s top economic adviser. Trump did grant Canada and Mexico a conditional exemption on Thursday, but his tariff proposals faced further opposition from Republican politicians, including Paul Ryan, the Speaker of the House of Representatives.

Despite all the wrangling, the S&P 500 Index was comfortably up by Thursday’s close, mounting a solid recovery from the price fall sparked by the tariff announcements last week.

Stuck in a muddle with EU

Across the pond, meanwhile, the UK and the European Union (EU) revealed hugely differing views on trade in financial services. This suggests that Brexit negotiations on the subject will be arduous to say the least. The UK wants to protect its ability to export financial services and products to the countries that will remain in the EU. Philip Hammond, the UK chancellor, said that financial services must be included in a free-trade deal with the EU and that there should be “mutual recognition” of each side’s regulatory standards. Mr. Hammond argued that existing third-country provisions would be insufficient, given the scale of the interaction between the two.

The latest twist in the tortuous Brexit tale had little effect on markets, however. The FTSE World Europe (ex UK) Index was up by 1.8% by Thursday’s close, while the UK’s FTSE 100 Index gained 1.9%.

Food for thought

Prezzo joined the growing list of UK restaurant chains that have recently announced closures to try to rescue their businesses. Burger-restaurant operator Byron and Jamie Oliver’s group have also reduced their numbers of outlets. Stresses cited for the UK dining industry include increases in wages, rent reviews, and rising prices for imported ingredients. The casual sector of the industry is also suffering from general overcapacity.

Big in Japan

Japan’s economy advanced by more than expected in the final three months of 2017. Fourth-quarter growth was revised upwards to +1.6% (on an annualized basis) from the +0.5% initially reported. There was a flurry of worry earlier in the week when Haruhiko Kuroda, governor of the Bank of Japan, suggested that the central bank would start reducing the support it has provided to the Japanese economy since the financial crisis. His statement was then dialed back, leaving investors to focus on more general worries such as a potential global trade war and the strength of the yen. Nevertheless, the Topix managed to eke out a 0.1% gain by Thursday’s close.

Financial engineering

A hostile £7 (US$9.7) billion bid for UK engineering firm GKN by Melrose Industries, an investment company, led to calls for the UK government to intervene. There are fears that the bid could be against the public interest on grounds of national security, given GKN’s involvement in defense-related programs. A number of members of parliament wrote to the UK business secretary asking him to block the proposed takeover. More generally, concerns surfaced about “asset stripping,” in the context of one of the largest UK industrial companies being broken down into its component parts and these being sold off. Others questioned what message any government intervention would send to prospective investors in the UK.

And finally…

In the UK, we swapped the snow brought by the Beast from the East for heavy rain. This (naturally!) led us to revisit our favorite cat jokes. Given the weather, we thought that this one merited a mention:

“What’s worse than it raining cats and dogs?”

“Hailing taxis!”

Then there’s this, for writers (and readers):

“What’s the difference between a cat and a comma?”

“One has the paws before the claws and the other has the clause before the pause”

We haven’t quite got that spring feline yet …

Important Information

Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.

Companies mentioned are for illustrative purposes only and are not intended to be a recommendation to buy or sell any security.

Indexes are unmanaged and are included for illustrative purposes only. You cannot invest directly in an index.

ID: US-090318-58994-1