Donald Trump and Liu He

Market Wrap 12/10/19

By: Gary Palar


The S&P500 ended a three-week losing streak, rising from 2944.2 to 2969.4 and ended the week 0.86% higher. Announced on Friday (Saturday, in Australia), the shrewdly named ‘Phase 1’ – the latest progress in US-China trade talks was unveiled by US President Donald and led the strong finish in markets this week, after relatively weak trade on Tuesday.

A Week in Review

US Markets

Tuesday kicked off with the Fed chairman Powell indicating the Fed would be taking some steps to minimise liquidity issues in the repo markets. This was covered last month by Charlie in his “Market Wrap”. This was backed in the FOMC Minutes released Thursday, the contents of which also depicted general concern for US growth, under the cloud of international trade tensions. News of the US Consumer Price Index ex Food & Energy the same day agreed with consensus estimates and was the same as the previous month at 2.4%.

Investors were relieved the day after, when Trump announced the delay of tariffs to 30% (from 25%) on US$250bn worth of Chinese goods, which was originally scheduled to go ahead on October 15th. This was the minimum ‘good news’ which was sought-after by investors in the most recent US-China trade talks. The statement went a step further when Trump proclaimed the countries had made unwritten agreements where China agreed to purchase US$40 to 50bn worth of agricultural products, from US$16 bn at the peak of last year, cited by Trump.

In addition, Trump highlighted progress in other demands such as the strengthening of intellectual property laws and currency provision. Treasury Secretary Steven Mnuchin added to the announcement that US-China talks had “almost complete agreement” in the opening of China to US financial services firms, in addition to the progress on transparency in foreign exchange. The news in general hadn’t been echoed by the Chinese government, whom previously have opted to soften the news on progress in trade agreements.

Many analysts see the latest as a win for both countries, though particularly, for China.

And for those lost on the progress of the US-China tit-for-tat, I’ve linked a good timeline of it, here.

Australian Markets

In a relatively quiet week in relation to domestic economic news, data released on Wednesday by Westpac Consumer Confidence showed a decrease in respondents’ evaluations of expectations of family finance in 1 and 5-year conditions. This could be interpreted as a product of an “extended period of low interest rates” by the RBA, the latest rate cuts passing to term deposits used by savers and retirees, moving rates below inflation.

ABS data released on Thursday showed Investment Lending for Homes and Home Loans data increasing, but at a lower rate to the previous month, indicating steady investment in housing. This was in line with expectations suggesting a housing revival. With reports suggesting long-term homeowners have begun considering selling their properties, it would be worth watching the movement in this space to evaluate domestic health.

European Markets

Ireland Great Britain Map
Ireland Great Britain Map

Traders on the side of the sterling on Friday would have been delighted after talks between UK Prime Minister Boris Johnson and Irish Taoiseach Leo Varadkar acknowledged a deal could occur before the Brexit deadline of October 31st. Further talks on how this could progress were expected to occur over the weekend. The progress of Brexit had been entangled in the issue of how borders and customs would operate on the border of Northern Ireland (part of the UK) and the Republic of Ireland.


Sources:

ABS, AFR, Al-Jazeera, Bloomberg, China Briefing, CNBC, FXStreet, NBC, Reuters, The Australian, Wikimedia Commons

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