Talking, not yet acting

Posted by: Paul Donovan

11 Feb 2019
  • "High level" trade talks between the US and China are to take place in Beijing. Three sides will be represented. Vice-Premier Li represents China. Trade Representative Lighthizer represents the US hardliners. Treasury Secretary Mnuchin represents the US moderates. Markets do not like trade taxes (as they are effectively a tax on equities), so will likely overreact to the newsflow.
  • The US government may shut down again. Congress is talking but not yet able to agree on the details of a settlement. The deadline for a deal is Friday. Failure to agree on this would raise market concerns about the future debt ceiling debate, and the September budget.
  • As China returns from the lunar new year holiday, a state-run newspaper is suggesting growth could fall to 6% this quarter. We expect 6.1% growth this year. With a declining population and slowing productivity, China's trend rate of growth is probably closer to 5%.
  • The UK is doing a data dump – production, trade and GDP numbers are all due. The economy may have slowed slightly in the fourth quarter. Overall consumers are resilient in the face of political nonsense, by taking the sensible approach of not caring. Companies are, however, inclined to delay investment. 

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