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America’s allies push back against Trump’s latest tariffs as markets voice their displeasure. More than 200 Chinese stocks are set to join MSCI indexes, and U.S. jobs figures are due Friday. Here are some of the things people in markets are talking about.

This Means (Trade) War!

America’s closest allies plan to slap billions of dollars in tit-for-tat tariffs on U.S. goods after the Trump administration announced it’s imposing steel and aluminum duties on them. The reaction was swift after Commerce Secretary Wilbur Ross announced the U.S., starting Friday, will levy duties on the imported metals from the European Union, Mexico and Canada, ending their temporary exemptions. The EU said it would take immediate steps to retaliate, while Mexico vowed to impose duties on everything from U.S. flat steel to cheese. Canada’s government said it will impose tariffs on as much as C$16.6 billion ($12.8 billion) of U.S. steel, aluminum and other products from July 1. U.S. manufacturers and business groups slammed the Trump decision, calling it a tax on U.S. companies and consumers.

Markets Unnerved

Equity markets in the U.S. and Europe were rattled by Thursday’s developments. The S&P 500 fell for the fourth time in five days as the escalation of trade tensions hammered American industrial and financial shares. The Canadian dollar and Mexican peso weakened, while the Swiss franc rallied on demand for havens. Rising trade barriers overshadowed reports that Italy is close to forming a government that is more EU-friendly than investors had feared, which prompted Treasuries to erases gains into the close.

Italy Populists Surge to Power

Italy’s populist Five Star Movement and League parties prepared to sweep to power with a program for fiscal expansion that poses a challenge to European rules. Giuseppe Conte, 53, a law professor with no political experience, will be sworn in as prime minister along with his cabinet on Friday by President Sergio Mattarella. The government was put together after almost three months of Byzantine wheeling and dealing which saw Five Star’s Luigi Di Maio and and the anti-immigrant League’s Matteo Salvini threaten early elections before emerging victorious. Di Maio and Salvini will serve as deputy premiers, with economist Giovanni Tria, 69, as finance minister, and euroskeptic economist Paolo Savona, 81, responsible for European affairs, according to a cabinet list which Conte read to reporters on Thursday night.

North Korea Progress

Secretary of State Mike Pompeo said the U.S. and North Korea made “real progress” during talks in New York over the conditions for a summit between Trump and Kim Jong Un, but declined to say if the two sides bridged key differences over issues such as denuclearization. “I believe they are contemplating a path forward where they can make a strategic shift,” Pompeo told reporters Thursday after meeting with Kim Yong Chol, a top adviser to North Korea’s leader. “We’ve made real progress in the last 72 hours.” The diplomatic focus will shift to Washington on Friday, where Trump will host Kim Yong Chol, the former spy chief who led the talks with Pompeo and who is carrying a personal letter to the U.S. president from Kim Jong Un. Any additional details on whether the on-again, off-again summit will go forward on June 12 in Singapore may be announced then.

Coming Up...

More than 200 Chinese stocks are set to be officially inducted into MSCI’s equity indexes Friday. This means traders looking to track the gauges run by MSCI, the world’s biggest stock index compiler, need to buy yuan-denominated stocks for the first time. Still, don’t expect much impact at first. Only a tiny slice of the selected stocks’ market capitalization will be added, and it will join in two steps, with the next being in September. In the U.S., the May jobs report is due, with all eyes on how the numbers could affect Fed action going forward. Over the weekend, U.S. Secretary of Commerce Wilbur Ross will travel to Beijing for more talks with Vice Premier Liu He on topics including ZTE Corp. and trade.

What we’ve been reading

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

• Mariano Rajoy is about to be ousted as Spain’s Prime Minister.
• India’s offer to sell its flag air carrier flops.
• Malaysia is working with Singapore to recover lost 1MDB funds.
• A Goldman Sachs VP is charged with insider trading.
• Canada Goose is bringing giant parkas to China.
• SoftBank Vision Fund is investing $2.25 billion in GM’s autonomous driving unit.

To contact the editor responsible for this story: Boris Korby at bkorby1@bloomberg.net

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