Tags: china | deal | investors | shutdown | government

Even Small China Deal Will Be Good News for Investors

china-us summit expressed in a chess game
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Wednesday, 13 February 2019 09:19 AM Current | Bio | Archive

President Donald Trump said yesterday about the March 1 deadline of the U.S.-Sino trade deal: “If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while, but generally speaking, I’m not inclined to do that.”

Financial markets for stocks firmed substantially on the hope that there could be no new trade tariffs to plague equity markets, Reuters explained.

Investors could do well keeping in mind that a really big deal is probably not on the agenda. Of course, financial markets would take a lessening of the tax burden on large companies as a good enough deal. Besides that, a deal to avoid another government shutdown is also moving in a market positive way, but this is perhaps less of a focus.

Consumer Price Inflation

Annual inflation rate slowed to 1.6 percent in January from 1.9 percent in December. It is the lowest rate since June of 2017, compared to market expectations of 1.5 percent, according to the U.S. government's consumer price inflation (CPI) data. On a monthly basis, consumer prices were flat, the same as in both December and November. The energy index declined for the third consecutive month, offsetting increases in the indexes for all items less food and energy and for food.

Job Openings and Wage Growth

Meanwhile, the U.S. labor market continued to power ahead. Job openings, a measure of labor demand, increased by 169,000 to a seasonally adjusted 7.3 million in December, the highest reading since the series started in 2000, and which logically causes labor shortages that in turn support wage growth.

Wage growth gains as shown on the wage tracker indices that is provided by the Federal Reserve Bank of Atlanta and now stands for the average overall "unweighted" 3-month wage growth in January at 3.7 percent.

Cleveland Fed President Mester Gives Her View on the Fed Funds Rate

Giving a prepared speech yesterday, Cleveland Fed President Loretta Mester gave the following remark that could be of interest for investors: “If the economy performs along the lines that I’ve outlined as most likely, the fed funds rate may need to move a bit higher than current levels. But if some of the downside risks to the forecast manifest themselves, and the economy turns out to be weaker than expected and jeopardizes our dual mandate goals, I will need to adjust my outlook and policy views.”

Eurozone Industrial Production Contracts Further

Industrial production in the Euro Area declined 4.2 percent year-on-year (y/y) in December, following a downwardly revised 3 percent contraction in November and compared to market expectations of 3.2 percent drop. It was the steepest decline in industrial production since November 2009 as output fell for all categories.

Among Member States for which data are available, the largest y/y decreases in industrial production were registered in Ireland at -19.8 percent y/y, Spain at -6.7 percent y/y and Croatia at -6.6 percent y/y.

There is a sense that the negative numbers from Germany that declined 3.9 percent y/y in December and 4.5 percent y/y in November may be being part of the weakness.

The euro quotes in the $1.12-$1.13 range against the dollar

Brexit Saga

The interminably tedious process of the U.K. exiting the European Union continued with the uncertainty that that brings.

Nevertheless, it got an interesting twist as The Guardian reported that Prime Minster Theresa May’s chief negotiator Olly Robbins was overheard by a reporter of ITV in a Brussels bar saying that MPs (Members of the House of Commons, the elected chamber of Parliament) will be given a last-minute choice between her deal and a lengthy delay.

According to the reporter, Robbins said the government had “got to make them believe that the week beginning end of March ... extension is possible, but if they don’t vote for the deal then the extension is a long one.”

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Investors could do well keeping in mind that a really big deal is probably not on the agenda. Of course, financial markets would take a lessening of the tax burden on large companies as a good enough deal. 
china, deal, investors, shutdown, government
Wednesday, 13 February 2019 09:19 AM
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