Merrill on US-China Trade:
As the US-China trade war enters a decisive phase, we outline three scenarios to help clients navigate the economic and market implications. The most favorable outcome is a near-term trade deal, with no additional tariffs. … in our second scenario there is another round of tit-for-tat tariffs. After a brief period of uncertainty, an agreement is reached. The last and most unlikely scenario is a full-blown trade war.
An imminent trade deal should allow the global economy to continue to grow above trend. … In the brinkmanship scenario we see downside risks to growth from higher tariffs and elevated uncertainty. A trade war, with across-the-board tariffs on US-China trade, would push the global economy towards recession.
Friday:
• At 8:30 AM, The Consumer Price Index for April from the BLS. The consensus is for 0.4% increase in CPI, and a 0.2% increase in core CPI.