Tags: trade | china | trump | rates | stocks | investors

Global Stock Markets Go Wild Amid Trade, Rate Tensions

market volatility: trader climbing on top of coin stacks in front of stock exchange results

Friday, 07 December 2018 09:35 AM Current | Bio | Archive

A global overreaction to the still lingering trade tensions between the U.S. and China has caused, for a great part at least, global equity markets to go wild in recent days.

President Donald Trump wrote on Twitter: “Statement from China: “The teams of both sides are now having smooth communications and good cooperation with each other. We are full of confidence that an agreement can be reached within the next 90 days.” I agree!”

China's Ministry of Commerce (MOC) stated in its weekly briefing: “In the next 90 days, we will follow a clear timetable and roadmap to hold consultation on issues of intellectual property rights protection, technological cooperation, market access and trade balance that conform to the interests and demands of both sides, and the two sides should strive to reach consensus … The two countries, and companies from both sides, share common interests on intellectual property rights protection, fair competition and broadening market access, which are all highly compatible with China's reform and opening-up drive.”

Markets got unexpected stunning news of the arrest in Canada of Huawei’s chief financial officer (CFO) Sabrina Meng Wanzhou who faces extradition to the U.S. in a case of the U.S, Justice Department that is investigating whether Huawei violated US sanctions on Iran.

In the meantime, markets got the news from The South China Morning Post that China has separated the arrest of Huawei’s CFO Sabrina Meng Wanzhou from trade talks between Beijing and Washington, which of course is a positive and should calm markets’ anxieties.

One could say as far as the trade truce is concerned, so far, so good…

U.S. Non-Farm Payroll Situation

Non-farm payrolls in the United States increased by 155,000 in November, which is still a good number that still reflects a strong overall U.S. economy, which continues to grow above trend, the Labor Department said.

The October number was revised downward to 237,000.

Job gains occurred in healthcare, in manufacturing, and in transportation and warehousing.

The unemployment rate stayed at 3.7 percent, a 49-year low.

Average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $27.35. Over the year, average hourly earnings have increased by 81 cents, or 3.1 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.95 in November.

These data will allow the Federal Reserve to remain, as expected, on its gradual rate hike path in December.

Powell: Economy 'Performing Very Well Overall' 

Fed Chair Jerome Powell referred to the labor market as very strong. The U.S. economy is “performing very well overall,” the job market in particular “by many national-level measures...is very strong,” with unemployment at a 50-year low he said.

Powell did not address monetary policy or the upcoming Fed meeting

OPEC Agrees on Production Cut

The Organization of the Petroleum Exporting Countries (OPEC) along with Russia and its allies will curb oil output by a collective 1.2 million barrels a day, under the deal still under negotiation. OPEC nations would cut 800,000 barrels and the Russia-led group would handle the remainder, The Wall Street Journal reported.

The Saudis “are considering a silent cut,” one delegate said, referring to a reduction that would not be announced.

In the oil markets, WTI crude oil and Brent crude oil are up more than 4.0 percent.

Eurozone GDP (Final) in Q3 

The Eurozone’s third quarter GDP growth came in unrevised in the final take on the third quarter. A 0.2 percent rise in total output matched the flash estimate although back revisions saw annual growth trimmed a tick to 1.6 percent.

Today's update provides a rather tardy look at the key GDP expenditure components and this confirms a particularly disappointing performance by domestic demand.

Net foreign trade was a drag despite the relative lowly level of the euro. Exports dipped 0.1 percent after a 1.0 percent gain in the second quarter while imports advanced 0.5 percent after a 1.1 percent increase. Combined, this made for a net drag of 0.2 percentage points.

With little evidence so far of any significant pick-up in activity in either October or November, downside risks to the ECB’s economic forecasts are building. And if realized, the prospect of any hike in official interest rates in 2019 would become rather unlikely.

Investors could do well keeping in mind that the global divergence with the United States remains well in place.

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

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A global overreaction to the still lingering trade tensions between the U.S. and China has caused, for a great part at least, global equity markets to go wild yesterday and the day before.
trade, china, trump, rates, stocks, investors
Friday, 07 December 2018 09:35 AM
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