Good day,
President Trump has doubled-down on protectionist trade policies with a new round of tariffs aimed at Chinese sectors that require U.S. companies to forego intellectual property rights to participate. Our chief economist, Ibrahiim Bayaan, reported yesterday on the increased risk for a trade war that this latest move represents.
Keep an eye on companies with heavy exposure to international trade—railroads like Kansas City Southern and Union Pacific with lucrative Mexican businesses are worried about NAFTA renegotiation, and air freight businesses like FedEx’s make their margins on high-value imports and exports. The performance and valuations of those sorts of large transportation companies track the economic cycle and international trade volumes and can be particularly sensitive to political uncertainty.
Did you know?
Yesterday, Trump announced tariffs on 301 Chinese products, and the Dow Jones Industrial Average closed below its 120-day moving average, a bearish signal for equity markets.
Quotable:
“If Trump really signs the order, that is a declaration of trade war with China.”
-Wei Jianguo, former vice commerce minister and now an executive deputy director of the China Center for International Economic Exchanges
In other news:
Trucking acquisitions put new spotlight on fleet values
Trucking companies newly flush with cash are stepping up strategies to grow through acquisitions, but they’re finding new challenges in financial reporting along the road. (Wall Street Journal)
The hidden economic rationale of China-Europe rail
Economies that were traditionally based on resource extraction are transitioning to transport hubs, backwaters becoming regional manufacturing centers, and previously irrelevant cities becoming catalysts for high-tech consumption. (Forbes)
Shares of Target and Kroger jump on merger rumors
Target shares were up 3 percent in Friday’s premarket session, while Kroger stock rose 8 percent initially on the report, but later pared their gains. (CNBC)
Uber Freight Rolls Out Incentives to Lure Scarce Truck Drivers
In an effort to attract drivers, Uber Freight this week launched an incentive program offering discounts on fuel, tires, maintenance and the purchase of new and used vehicles. (Wall Street Journal)
Maersk Honam seeks refuge in Jebel Ali, UAE
A cargo fire broke out on the containership on March 6; five crewmembers died as a result. The Honam is still burning, according to the most recent reports. (Maritime Executive)
Final Thoughts:
There was a surprise this morning when final February new home sales data were released: new home sales contracted by 600 basis points instead of an estimated 4.6% estimated growth. New median home prices increased 9.7% in February, which may have put downward pressure on demand. FreightWaves reported earlier this month on soaring lumber prices: rising material costs, a tight labor market for everything from trucking to construction, and millennial demand are all forecasted to contribute to double-digit home price increases in 2018.
If the spring home-selling season underperforms expectations, expect a lag in summer housing starts for the fall selling season as developers scale back construction and wait out high material and labor costs.
Hammer down everyone!
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