قالب وردپرس درنا توس
Home / World / The truce between Trump and Xi could bring more questions to the markets than answers

The truce between Trump and Xi could bring more questions to the markets than answers



Uncertainty as to whether a meaningful agreement can be concluded could emerge over the markets in the second half of the year.

Existing tariffs will persist and companies will continue to hit. And the government's position on Chinese technology giant Huawei is still grim, which could make the technology sector nervous.

"The Temporary Arrangement contributes little to resolving the fundamental trade disputes that broke the talks in May and is not a sustainable solution for Huawei," wrote Eurasia Group analysts, a political risk consultant.

Global Stock markets rebounded spectacularly in the first six months of 2019. The S & P 500 gained more than 1
7%, reaching an all-time high recently. The Dow added a similarly impressive 14%.

In China, these gains were even greater. The Shanghai Composite gained more than 20%. (Hong Kong's Hang Seng recorded a more modest 10% increase.)

However, there were signs of fragility. When Trump suddenly said that he was going to raise tariffs on China in May, the stock plummeted. And most analysts are largely basing their current levels on the assumption that the US Federal Reserve will lower interest rates in July. Chairman Jerome Powell has hinted that a rate cut could be on the cards, but the timing and extent of each move remains an open question. They look to the future.

The main problem is that US tariffs on Chinese goods worth US $ 250 billion will persist, as will the Chinese retaliatory tariffs on US exports. This will continue to weigh on corporate profits. And the longer these tariffs remain in force, the more companies consider shifting their supply chains – a costly endeavor that could ban spending in other areas.

The US position on Huawei also remains ambiguous.

  Trump has reversed his course on Huawei. What's happening now?

Trump said this weekend that he would again allow US companies to ship components to Huawei that would not threaten US national security, an obvious reversal after his Administration blacklisted the manufacturer of smartphones and telecommunications equipment in May. He cited the pressure from US technology companies as contributing to his decision.

However, it is not clear how the US will change its export ban to meet this standard and whether it will grant Huawei access to crucial US parts for all divisions of its business. The Trump administration is also facing significant domestic pressure to continue its broadside against Huawei, which, according to US politicians, is a national security threat.

"Trump's mixing of Huawei and trade talks is making both more complex," said Eurasia Group analysts.

2nd OPEC Session: OPEC meets in Vienna on Monday and Tuesday. The most important item on the agenda is whether the member states will extend the production cuts that expire at the end of June.

According to reports, Russia and Saudi Arabia have agreed to extend the cuts by six to nine months.

S & P Global Platts predicts that the group will agree to extend the current cutbacks by the end of the year, but will not continue to throttle production. The markets agree.

Such a move could support prices in a volatile moment. Oil was on a wild ride with contradictory signals, making it difficult to guess if prices are generally higher or lower.

Brent crude, the global benchmark, ended Friday at $ 66.55, up 2% for the week. US prices rose 1.8% to $ 58.47.

The geopolitical tensions in Iran and Venezuela have raised concerns about limited supply and pushed prices higher. However, there has also been some evidence of oversupply recently as global economic growth slows. Higher inventories drove the oil into a bear market earlier this month.

3. Employment Report: The US Department of Labor will publish its monthly employment report on Friday.

Economists interviewed by Refinitiv assume that the unemployment rate with 165,000 additional jobs is a constant 3.6%. This would be a rebound from the 75,000 jobs added in May, but a slight slowdown from the 175,000 jobs created on average over the past six months. Federal Reserve rate cut in July.

Other indicators, such as consumer sentiment and durable goods orders, have declined in recent months due, among other things, to persistent trade tensions.

4. India's Economy: The Indian government, led by Prime Minister Narendra Modi, will publish a key economic report this week and present its annual budget to get the economy back on track. The quarter ended in March – the lowest rate in two years – which means that India lost the title of the fastest growing economy in the world to China. A former government adviser warned earlier this month that growth in recent years may have been "a significant overestimation" due to a change in the way it is calculated.

5. Next week:

Monday – OPEC meeting; US and German production data
Tuesday – German Retail Sales
Wednesday – US Markets Half Day; US Trade Balance for May
Thursday – US Markets Closed
Friday – US Job Report

Lydia DePillis and Rishi Iyengar contributed to the coverage.


Source link