Trade and capital

Posted by: Paul Donovan

21 May 2020

Daily update

  • The Trump Twitter Feed was active again overnight – always a slightly unnerving signal for markets. US President Trump has increased criticism of China. This is a worry for the bounce back. While domestic pent-up demand will boost US growth in the third quarter, restoring the level of GDP will require a stronger underlying economy. Trade tensions will not help. US President Trump is trying to achieve a delicate balance between the need to keep the trade deal and a need to rally political support.
  • The US Senate has passed a bill that would prevent Chinese companies from listing on US exchanges (the bill has not yet been introduced to the House). It may be that if the US wishes to preserve the trade deal with China, the new battleground becomes the capital account.
  • Korean export numbers for early May showed a drop of over 20% y/y. This is hardly surprising. Lifting lockdowns will impact trade with a lag, which is why economists are focused on a third-quarter bounce back. Japan's export data for April was hit by weak car exports (overall exports to China fell less than elsewhere).
  • Apparently, someone thinks it is still worth publishing business sentiment opinion  polls. Goodness knows why.

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