Tags: us | china | deal | market | panic

US, China Will Forge 'Limited' Deal to Avoid Panic

US, China Will Forge 'Limited' Deal to Avoid Panic

By
Wednesday, 03 April 2019 09:23 AM Current | Bio | Archive

The ADP National Employment Report informs that private businesses in the United States hired 129,000 workers in March, lower than the 170,000 expected increase and below the February's 197,000 gain.

For investors it could be helpful that this is still a good overall number.

All this is positive for U.S. stocks.

That said, when looking into the details of the report, the question in the U.S. labor market now appears to be: “Where do the companies find the workers they want to hire?” Labor shortages, even if still largely confined to specific sectors, are enough to constrain payroll growth, although it will of course “encourage” wage growth.

The dollar index (DXY) at 97.0410 remains practically unchanged from yesterday’s close

Stock markets’ futures in Asia, Europe and America are all showing overwhelmingly green

With Chinese Vice Premier Liu He arriving in Washington for trade talks today, investors could do well focusing back for a moment on tariffs as well as their impact.

It’s a fact that President Donald Trump’s trade tariffs have fallen disproportionately on U.S. equities of listed companies and the U.S. customers of the U.S. listed companies. This is because large listed companies do nearly all of the world’s trade.

The dramatic equity selloff at the end of last year and the astonishingly strong rally in equities at the start of this year, really have very little to do with the economic outlook. Instead, it reflected the relative performance of equity listed companies compared to the economy.

If you impose a tariff or tax that mainly hurts listed companies, equities will logically underperform the overall economy. If hopes rise that those tariffs or taxes will be reversed, equities will very logically outperform the overall economy.

I expect that a limited trade deal will eventually be forged between the U.S. and China.

I don't expect a complete, transformative agreement with a Rose Garden signing ceremony, but just enough of a deal to prevent equities plunging into a panic about further tariff or tax hikes in the future.

The U.S. side seems to be somewhat distracted by largely irrelevant issues like the stability of the Chinese currency or Renminbi/Yuan (CNY), which the Chinese can happily concede over, CNBC reported. The question is whether the U.S. is going to concede on reducing enough of the existing tariffs to satisfy China’s demands.

In the meantime, from the Euro area we got today the seasonally adjusted volume of retail trade data that increased by 0.4 percent in February after having increased by 0.9 percent in January. The year-on-year calendar adjusted retail sales index increased by 2.8 percent in February, which was up from 2.2 percent in January.

Regionally, there were solid monthly performances by Germany (0.9 percent) and Spain (0.7 percent) but France (minus 0.1 percent) remained relatively subdued.

Today's data increase the likelihood of economic growth not having slowed any further this quarter, which will please the European Central Bank (ECB).

In fact, the Euro area domestic consumer has been doing rather well recently and retail sales have been growing at a reasonable pace. The strength of the Euro area labor market is of course good news for Euro area consumers. Most of any economic weakness that has been evident has come from companies holding back on investment and the related impact of that on export demand.

Finally, the interminably tedious process of cutting the European Union (EU) off from the United Kingdom (UK) is set to become even more interminable.

UK Prime Minister Theresa May has apparently decided to put into practice that ancient proverb that says “the enemy of my enemy is my friend,” and is to sit down with the leader of the opposition Labor Party Jeremy Corbyn, The Guardian reports.

Immediately, a number of vocal “Leave” supporters seem to be quite upset of this exercise of sovereignty and the proper functioning of the UK Parliamentary process.

The move could be seen as an attempt to force Corbyn to take a “clear stance on the whole divorce position”. Something that Corbyn has tried to avoid doing at all.   

If the two cannot agree on a way forward, then Parliament gets to decide, provided that Corbyn agrees to that.

For the time being, financial markets seem to have taken this as a “softening” of the exit stance.

The British pound at $1.3167 remains relatively stable so far.

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

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
HansParisis
I expect that a limited trade deal will eventually be forged between the U.S. and China. I don't expect a complete, transformative agreement with a Rose Garden signing ceremony, but just enough of a deal to prevent equities plunging into a panic about further tariff or tax hikes in the future.
us, china, deal, market, panic
743
2019-23-03
Wednesday, 03 April 2019 09:23 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved