Trump wants something (a trade deal)

Posted by: Paul Donovan

21 Nov 2019
  • The US House of Representatives passed the US Senate's bill on Hong Kong. President Trump has ten days to find a Sharpie and sign this, or chose to veto. A veto would almost certainly be overturned. Financial markets price this as a risk to a trade deal, but not a serious risk. If investors had believed in a serious risk, it would have resulted in more negative market moves.
  • The Chinese trade negotiator, while "confused" by US demands, was sounding positive on a deal. Longer term, there may be some costs associated with the US legislation – it adds uncertainty around global trade rules.
  • The US impeachment hearings do not really concern markets. Investors are not yet pricing for President Pence, and any impact on the 2020 elections is too distant to affect markets at the moment. The Fed minutes were more important for markets, and signalled a central bank on hold on policy (while acknowledging the economic damage of current trade policy).
  • Sentiment data is due in France and the US – sentiment has overreacted a lot, but recently some measures have closed the gap to reality. The OECD Economic Outlook is old news before it is published – the OECD is not noted for the timeliness of its forecasts.

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