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(Bloomberg) --

Tariffs threaten serious damage, NATO allies on the defensive, and 2018 is big for M&A. Here are some of the things people in markets are talking about today.

Collateral damage

With his latest trade war salvo -- a new $200 billion list of Chinese goods facing additional tariffs -- Donald Trump could torpedo a market recovery, Federal Reserve policy, and the strongest global upswing in years, economists warn.  The longer-term threat to global growth and U.S. investment activity may outweigh short-term concerns Fed officials might harbor if tariff-spurred inflation rises. With officials projecting two more rate hikes this year and three in 2019, U.S.-China trade relations present a downside risk to the tightening trajectory, and for bond-market yields. The U.S. argues it had no choice but to move forward on the new duties after China failed to respond to concerns over unfair trade practices and Beijing’s abuse of American intellectual property.

NATO, Trump-style

As he prepared to sit down for NATO’s annual summit in Brussels on Wednesday, Trump had already put allies in a defensive mood by openly questioning the value of the generations-old alliance and linking his grievances on defense spending to America’s trade deficit with Europe. On arrival, the president complained that German imports of Russian oil and natural gas make Angela Merkel’s nation “a captive of Russia.”  Asking European governments to devote 2 percent of GDP to defense, a goal outlined at a 2014 meeting, may be a blunt weapon that won’t necessarily buy more combat-ready capability. 

M&A bonanza

Rupert Murdoch’s 21st Century Fox Inc. boosted its bid for Sky Plc, raising the stakes for Comcast Corp. to retaliate in a battle for control of Britain’s top pay-TV company. Sky is a pawn in a wider contest that has media giants including Walt Disney Co. and Comcast racing to fend off powerful digital rivals. Multi-billion dollar deals that will reshape industries including media and healthcare have set 2018 on course to be the biggest year ever for global M&A.

Markets shudder

It was risk-off as markets brace for another escalation in the burgeoning trade war. China’s Shanghai Composite Index fell 1.8 percent and the MSCI Asia Pacific Index dropped 1 percent, while Japan’s Topix index closed 0.8 percent lower. Copper slumped 2.6 percent. In Europe, the Stoxx 600 Index slid 1.2 percent as of 5:45 a.m. The dollar was up against all G-10 peers as investors sought safety.  S&P 500 futures pointed to a drop at the open and the 10-year Treasury yield was at 2.838 percent.

Pondering prices 

Producer prices -- both headline and core -- may get more than their usual scrutiny for evidence of spillover from trade tariffs, which would unnerve bond traders who take their cue from inflation. PPI is due out at 8:30 a.m Wednesday, and will serve as an appetizer before consumer-price data arrive on Thursday. 

What we’ve been reading

This is what caught our eye over the last 24 hours.

  • A $100 billion bet on growth by bond giants may unravel.
  • Reckoning for Wall Street bro culture
  • Behind the debt binge that threatens markets
  • Thai boys freed from cave, no thanks to Elon Musk
  • The tax dodge that hit the German treasury. 
  • Behind the debt binge
  • How a trade war affects everyday life.

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