Stroking trade stokes markets

Posted by: Paul Donovan

15 Nov 2019
  • US economic adviser Kudlow has said that a trade deal with China is "coming down to the short strokes." Perhaps that is a sporting metaphor? The markets took this as meaning a deal is more likely, and relatively soon. Kudlow also said US President Trump was "considering" a report about taxing US consumers of cars partially made in the EU. Markets assume this will not happen.
  • European trade data for September is scheduled for release. This does not typically interest markets, but any trade news might provoke a tweet on the Trump Twitter Feed. Tweets worry markets, though not as much as they once did.
  • US import and export prices are pre-trade taxes. They do help establish if Chinese companies are absorbing taxes through lower prices (probably not). They may hint at whether supply chain shifts (clearly happening) mean higher prices – as rerouted supply chains are companies' second best option. 
  • US retail sales for October come after unexpected weakness in September (watch for revisions). The consumer is largely ignorant of the trade tax increases – they have mainly hurt US companies. Consumers in the US and elsewhere remain supported by strong labor markets, and spending patterns suggest confidence in the future.