TradingView: Investors hoping for US-China trade deal


  • Economy
  • Sunday, 01 Dec 2019

Office workers shout slogans as they attend a lunchtime anti-government protest in the Central district of Hong Kong, China, November 25, 2019. REUTERS/Thomas Peter

AS we draw near to year-end, many would prefer to see a trade agreement instead of gifts from Santa Claus.

Unfortunately, the United States side is doing everything to take it out of our hands.

Last week, President Donald J. Trump signed the bill backing Hong Kong protesters in spite of Beijing's objections.

China is now considering putting drafters of Hong Kong human rights law on the no-entry list.

There is no doubt that if the US continues putting pressure on China, or even interferes in China's internal affairs, the trade talks might get stuck.

Nevertheless, all three major U.S. equity indices (the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite), together with the S&P/TSX Composite and MSCI World indices reached new all-time highs.

It can be mainly contributed to better than expected U.S. initial jobless claims and growth in October U.S. personal spending, implying that consumers remain in a “good mood” heading into the holiday season. Thus, fear of a recession in the American economy is not on the agenda yet.

Meanwhile, according to Bloomberg, China has ordered local governments to speed up the issuance of debt earmarked for infrastructure projects, so that the proceeds can be invested early in 2020 to help boost the slowing economy.

We still don’t have any details on when the sales will actually begin, or what the total quota for 2020 will be.

One thing is for sure, the amount of negative signals from China continues to rise. Among China’s biggest challenges is the deteriorating health of smaller lenders and regional state-owned companies, whose financial linkages risk triggering a downward spiral without support from Beijing.

Japan is also suffering a downturn: its factory output posted the largest fall in almost two years. Japan’s jobless rate, in turn, stayed at 2.4% in October, unchanged from the previous month, as well as job availability.

Thus, the data may and will affect the Japanese Yen. Last week it fell by 0.76% to ¥109.49, against the U.S Dollar, and that is despite the news that trade officials from China, Japan, and South Korea are negotiating a free trade agreement in Seoul...

However, the Japanese Yen was not the unique currency to fell, as the won also weakened after the Bank of Korea kept the policy rate unchanged.

The Chilean peso set a record low. In the past two months, the dollar rose against the Chilean peso for almost 20%.

To save its weak peso, the country’s central bank said it would sell up to $20 billion in foreign currency interventions starting early next week in order to stabilize the peso. The intervention program is to last through May 29,2020. The question is for how long this policy will work if the government fails to stop the protests.

Finally, yet importantly, gold prices continue to move sideways as markets are awaiting further developments on how U.S.-China trade talks would proceed after signing the so-called “Hong Kong bill” into law.

This week’s major macroeconomic reports

Monday

  1. ECB President Lagarde Testifies at European Parliament
  2. RBC Canadian Manufacturing PMI (NOV)
  3. ISM Employment (NOV)
  4. ISM Manufacturing (NOV)
  5. Markit Mexico PMI Mfg (NOV)
Tuesday
  1. JPY Monetary Base (YoY) (NOV)
  2. RBA Cash Rate Target (DEC 3)
  3. Markit/CIPS UK Construction PMI (NOV)
  4. Unit Labor Costs (YoY) (2Q)
Wednesday
  1. Australian Gross Domestic Product (YoY) (3Q)
  2. Caixin China PMI Composite (NOV)
  3. Caixin China PMI Services (NOV)
  4. US MBA Mortgage Applications (NOV 29)
  5. Bank of Canada Rate Decision (DEC 4)
  6. US ISM Non-Manufacturing/Services Composite (NOV)
Thursday
  1. RBNZ Announces Bank Capital Review Decisions
  2. German Factory Orders n.s.a. (YoY) (OCT)
  3. Markit Germany Construction PMI (NOV)
  4. US Initial Jobless Claims (NOV 30)
  5. US Trade Balance (OCT)
Friday
  1. JPY Labor Cash Earnings (YoY) (OCT)
  2. CAD Net Change in Employment (NOV)
  3. US Change in Non-farm Payrolls (NOV)
  4. US U. of Mich. Sentiment (DEC P)

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