Summary for the 25th of February 2019


Japan Producer Prices for services rose by 1.1% year over year in January, same rate as in previous month. The growth rate for service prices is usually higher than for manufacturing prices, which means the rising prices for services won’t contribute much to increase the overall inflation rate. The Japanese government has come to accept this fact. The economic adviser to Japan's Prime Minister and one of the key architects of Abenomics, Koichi Hamada, said that prices don’t need to rise so much. Once the job market is tight enough, the public is better off having prices fall. The goal of 2% inflation can be abandoned, and the appropriate target level can be decided by the central bank. This might lead to the Bank of Japan to be less expansionary in the onward monetary policy.

The US president, Donald Trump, announced that the US would postpone the implementation of tariffs on Chinese goods. Trump said that progress had been made in the negotiations, such as the issues of Chinese government subsiding  state owned companies, the forced transfer of technology through joint ventures for foreign companies, protection of intangible property and about currency. The issues of protection of intangible property and the forced transfer of technology are two of the most difficult issues for the two countries to agree on because these two issues are well incorporated in the China’s corporate organization.

The British Parliament was supposed to vote on the changes of the Brexit deal this week. The UK prime minister, Theresa May said that the vote would be postponed, and that she and her team would bring a meaningful vote to the Parliament by 12th of March. Yesterday she was in Brussel for discussion with other EU countries. She was in Sharm el-Sheikh in Egypt for the weekend to attend a discussion between the EU countries and the Arab leaders.

Indices on the 25th of February: The expectation for the postponing of the tariff implementation has already lifted the US stock market before the weekend. The Asian stock markets ended in a gain after the tariff’s deadline was postponed.

Dow: +0.7% (22nd of February )
S&P 500: +0.6% (22nd of February)
Nasdaq: +0.9% (22nd of February)
Nikkei: +0.6%  (25th of February)
Chinese indices: +4.6% (25th of February)
STOXX Europe 600 Index: +0.26% (25th of February)

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