The avant-garde art of the deal

Posted by: Paul Donovan

10 Oct 2019
  • There are contrasting stories about today's US-China trade talks. There are reports that a revived currency pact could be the basis of a partial deal, but also a suggestion that the Chinese only intend to stay a day. The economic consequences should not be exaggerated.
  • As time has gone on, companies have found ways to reroute supply chains and avoid trade taxes. That means that the negative impact may fade over time (though is still negative). The real problem is uncertainty over trade taxes weakens investment. Without a deal, uncertainty does not get dramatically worse. With a partial deal, companies may have enough trust to significantly increase investment.
  • Japanese machinery orders numbers were weak in August. This signals one area of investment (other investment goods are available), but is not good news. Various European industrial production numbers are due – countries focused on making investment goods (like Germany) have fared badly. Those focused on consumers have tended to do better. The ECB minutes and US consumer price inflation are also scheduled.
  • The UK and Irish prime ministers are due to meet in a secret location (apparently Liverpool). Markets still look for an extension, not a deal or no-deal outcome.