China's stimulus fades. Oil prices revive

Posted by: Paul Donovan

23 Apr 2019
  • China's politburo meeting late last week suggested that additional general stimulus was unlikely. Recent growth was described as being stronger than expected. The challenges to growth are seen as structural, not cyclical. With a declining population and the productivity changes that accompany a move to middle income status, China's trend rate of growth is now closer to 5% than 7%.
  • The oil price has risen on news that the US will end sanction waivers on Iranian oil. Sanction waivers effectively neutered the policy last year, allowing oil prices to fall. Markets are cautious about US assertions that Saudi Arabia and the UAE will make up any loss of supply.
  • Prospective US Federal Reserve governor Cain is not able to take the pay cut associated with public service, and has withdrawn from consideration. Cain's possible nomination and that of former Trump adviser Moore raised concerns about the Fed's political independence.
  • The data calendar is unexciting. Government debt levels in Europe will be published (offering a contrast to the US, and also a focus for Italy). A European consumer sentiment opinion poll is due. The US offers the Richmond Fed business survey and new home sales.

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