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Investors Must Watch France's Yellow Vest Movement

Yellow vest protesters demonstrate peacefully in the streets of Paris, France, Saturday, Jan. 12, 2019
(AP Photo/Thibault Camus)

By Wednesday, 30 January 2019 10:56 AM Current | Bio | Archive

French Consumption of Durable Goods Falls Significantly in December

Consumption of durable goods fell sharply in December by −3.8 percent, after a +0.1 percent rise in November.

In particular, car purchases fell, possibly in anticipation of a more favorable scrapping premium from January onward. The decline in household durables purchases, particularly telephones and televisions, also contributed to the decrease in durable goods consumption in December. Over the fourth quarter, purchases of durable goods diminished by-2.3 percent.

Although not referred to in the official INSEE, the French National Institute of Statistics and Economic Studies data releases, the numbers were subject to some destruction from the gilets jaunes, or yellow vests, protests. The yellow vests movement is motivated by rising fuel prices, high cost of living, and claims that a disproportionate burden of the government's tax reforms are falling on the working and middle classes, especially in rural and peri-urban areas or outskirts.

The question is to what extend French consumers would be willing to go online say to avoid rioters, although structural shifts for online sales are not always very well captured in old fashioned economic data.

Anyway, investors could do well to keep an eye on how the situation in France evolves.

US - China Trade Talks

Formal trade talks between China and the United States get underway in Washington DC today with something of a cloud hanging over the process. Recent tariffs, which are basically a tax on equities have not been well received by the financial markets. Hopes of removing some of those tariffs or at least not having further tariffs imposed have been important to the equity rally this year.

However, the announcement that the United States is to prosecute the high profile Chinese Telecom Firm Huawei Technologies, is not calculated to spread peace and harmony over the negotiations today, Reuters explained.

The Trump Twitter feed has been sounding somewhat confused. On the one hand, the benefits of taxing U.S. steel consumers were being praised. The tariffs have helped less competitive U.S. steel producers but hurt more competitive U.S. auto producers. On the other hand, there have been tweeds of optimism about a deal with China being done.

FOMC Expected to Give Information Today

It is with some relief that we can turn to the relative sanity of the Federal Reserve FOMC meeting today where there will be a press conference given by Fed Chair Powell because the Federal Reserve is now all about press conferences all of the time.

No change in policy is expected today. Instead economists and investors will obviously look at the ‘nature’ of the pause.

So, will the Fed Chair signal a long or a short pause, or just leave markets guessing? Parts of the problem is that with a debt ceiling debate likely in the second quarter and a budget debate in September, there may be a narrow window of opportunity for any action on the part of the Federal Reserve.

Consumer Confidence Falls

Consumer confidence fell yesterday to its lowest level in a year and a half, but that may have been caused by a mix of the partial government shutdown, turbulent financial markets and political bias on the part of the consumers. Nevertheless, consumer spirits remain robust by historic standards when we look at the Present Situation Index that declined only marginally from 169.8 to 169.6.

Political bias seems to be a big reason for the abnormally high levels of consumer confidence in recent months and moves from bias say little about the economy as such.

Brexit Saga Continuous

The UK Parliament has signaled that it would like the UK government to spend the next couple of weeks renegotiating a deal that took 18 months to negotiate in the first place.

This looks like to be fun.

The UK Parliament has also indicated it didn’t want a ‘No-deal’ exit from the European Union (EU).

However, the British pound (Sterling) was a little ‘unhappy’ that Parliament rejected a process that would create an automatic extension of the exit date, although that option may resurface in two weeks’ time when yet more votes are called.

The UK-EU exit process is not called “interminable’ for nothing.  

So, the sterling reaction may misrepresent the political realities.

The European Union is saying it doesn’t want new negotiations at all, BBC reported. This may be true. The problem is that 40 years of EU negotiations has suggested that Europe often said things and then does the complete opposite. This does not necessarily produce the best possible outcomes.      

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

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The question is to what extend French consumers would be willing to go online say to avoid rioters, although structural shifts for online sales are not always very well captured in old fashioned economic data.
franc, e yellow, vest, investors
Wednesday, 30 January 2019 10:56 AM
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