Market Morning: Trade Grenade, Capital Gains Cut, Japanese Yields, Huawei Overtakes Apple

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Trump Trades Trade Handgun For Trade Grenade, Proposes Raising Tariffs to 25%

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The trade war just escalated again. Instead of the initially proposed 10% tariff on $200 billion worth in Chinese goods, the Trump Administration, featuring mainly Trump, and maybe some Ross and Navarro, has proposed raising tariffs already imposed on these goods to 25%. If the Chinese don’t break here and lower barriers to US imports, then the cost of living in the US is really going to go out of control and price inflation on paper could climb closer to 5% annualized or higher. Trump could announce the new tariffs as soon as today, though it is unclear if and when they would actually go into effect. Retail stocks are not going to like this news.

Related Tickers: (NYSEARCA:XRT)

SEE: Cryptocurrency Daily Roundup July 31

Trump to Lower Capital Gains Tax?

In a move that is estimated to save taxpayers about $102 billion over the next decade, the Trump Administration is considering indexing capital gains taxes to inflation. That basically means that the capital gains tax would be whatever rate it’s at, minus the official price inflation rate. Either that, or the other option Trump is looking into is simply cutting the capital gains tax rate, which is currently at 20%. The US has one of the highest capital gains tax rates in the world, which technically goes after company owners since they are the ones that own stock, while there is also a corporate income tax that goes after the same people, because that is money that corporations cannot pay in dividends or reinvest in capital.

Related Tickers: All of them. Cut the capital gains tax and all stocks go up.

Morgan Stanley Warns of Impending Correction

The major indexes (NYSEARCA:SPY) (NASDAQ:QQQ) (NYSE:DIA) are in for some trouble, and soon, say Morgan Stanley (NYSE:MS) analysts. Now that the 4.1% hunky dory GDP number has already printed and, earnings were a smash hit for most of the big players, investors may start asking Wall Street what has it done for them lately? August/September is typically a dodgy time for equities, so one would expect that if they are correct, Morgan Stanley shares should climb during this correction, since the big bank will have missed it or even sold it short. We’ll see when it comes how Morgan Stanley shares perform.

Japanese Bond Yields Rise Over 100% In a Day

Well that was quick. Japanese 10Y government bond yields have more than doubled overnight to 0.13% from 0.06% on July 31st. The jump comes a day after the Bank of Japan signaled that it would allow more wiggle room in bond yields. The move has effectively doubled Japan’s debt service costs, and Japan has the heaviest debt to GDP ratio of any country in the developed world at 253%. It is unclear exactly how much wiggle room Japanese government bond yields have before bankrupting the country.

Related Tickers: (NYSEARCA:EWJ)

Huawei Overtakes Apple as #2 Smartphone Seller

In a better kind of competitive trade war that has to do with product quality rather than political dictates, China’s Huawei has overtaken Apple (NASDAQ:AAPL) to become the #2 seller of smartphones globally. Apple is now like Snapple, which always wanted to be #3. Huawei took 15% global market share in smartphone sales last quarter, over Apple’s 12%. Samsung still leads the pack at 20%. Huawei’s feat is quite impressive considering it has been shut out of the entire US market. Imagine the global market share it could get if it were allowed to sell its products within the US? The excuse the US has made in preventing Huawei from selling its products in the country is that Huawei is accused of facilitating Chinese government spying.

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