Trump Dangles Possibility of Trade Deal with China Before Market Ahead of Mid-Term Election

November 2, 2018

U.S. President Trump claimed trade talk progress after phone conversation with Chinese President Xi Jinping and instructed his cabinet to frame a possible trade deal with China before the G20 summit November 30-December 01 in Buenas Aires. The timing of this development four days ahead of U.S. mid-term elections is conspicuous.

Stock markets around the world nonetheless shot higher, with gains of 4.5% in Hong Kong, 3.5% in South Korea, 2.7% in China, 2.6% in Japan, 1.8% in Singapore, 1.7% in India, and 1.2% in Indonesia. Share prices so far have also risen today by 1.7% in Italy, 1.6% in Germany, 1.4% in France, 1.0% in Spain and 0.8% in Great Britain.

And the dollar has declined 1.0% relative to the pes0, 0.7% versus the yuan, 0.4% vis-a-vis the Swiss franc and kiwi, 0.3% against the euro and 0.1% versus sterling. In contrast, the dollar shows gains of 0.4% against the loonie and 0.2% versus the yen.

10-year sovereign debt yields have climbed today by 6 basis points in Greece, 3 bps in the U.K., Germany, the Netherlands, Switzerland and U.S., and 2 bps in France. But the Japanese JGB yield is unchanged.

Industrial metal prices are up while gold and oil have dipped 0.2%.

Euroland’s manufacturing purchasing managers index sank 1.2 points to a 26-month low of 52.0 in October. Only in Spain, whose PMI rose 0.4 points to a 2-month high, did the PMI improve. Elsewhere in the joint currency union, the factory PMI scores touched a 46-month low in Italy, a 29-month low in Germany, 25-month lows in Austria and France, a 21-month low in The Netherlands, a 7-month low in Ireland and a 6-month low in Greece, and these readings ranged from 49.2 to 57.1.

Britain’s construction purchasing managers index rose 1.1 points to a 3-month high of 53.2 in October.

Poland’s manufacturing PMI dipped 0.1 to 50.4, a 2-year low.

Swiss retail sales volume sank 1.6% on month and 2.7% on year in September, a considerably weaker outcome than analysts were anticipating.

German import prices advanced 0.4% on month and 4.4% on year in September, as energy recorded monthly and yearly increases of 4.3% and 32.5%. Excluding energy, import prices dipped 0.2% on month and rose just 1.3% on year. Energy costs turned lower more recently.

Australian retail sales rose 0.2% on month in September and 3.5% on year. Sales were also up 0.2% in volume terms in the third quarter.

Australian producer price inflation accelerated last quarter to 2.1% from 1.5% in 2Q, as domestic producer prices climbed 0.7% on month and 1.9% on year and import prices went up 1.6% on quarter and 4.3% on year.

Japan’s monetary base posted the same 5.9% on-year rise in October as in September, but that was down from growth of 6.6% in 3Q, 7.8% in 2Q, and 9.4% in the first quarter. The Bank of Japan’s balance sheet at end-October was only 2.66% larger than a year earlier.

Thai CPI inflation stayed at 1.2% in October. Core CPI was even lower at 0.7%, but PPI inflation accelerated 0.4 percentage points to 1.7%.

U.S. and Canadian labor statistics and trade figures will be released shortly. U.S. factory orders get reported a bit later.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribuiton without express permission.

 

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