Summary for the 4th of April 2019


As mentioned in yesterday’s post, the trade negotiation between the US and China is coming to an end. Both countries have agreed on several issues, but there are two major issues that still remain. (paywall)

One involves the already implemented tariffs on Chinese goods by the US, and what will happen to these tariffs after the trade deal is signed. China wants to see these removed as soon as possible, while the US wants to keep some of the tariffs in place, to have the pressure on China to comply with the deal.

The second issue involves the terms of enforcement of the deal. Many of the demands proposed by the US will be difficult to monitor and measure. Example of this is how to measure China’s effort to protect US companies intellectual rights. One of the challenges facing foreign companies in China is the Chinese judicial system which is not independence from the Chinese Communist Party, and where the courts of first instance (Local people’s courts), which handle the intellectual property infringement cases, usually rule in favor of the Chinese companies.

A trade agreement will be positive for both countries. Less decline on manufacturing and exports for China, and more certainty on employment. For the US, the deal will be positive for the US companies operating abroad. Tariffs have made it less profitable for the US companies to operate in China, due to the costs of importing are higher, with high competition, the costs can not easily be transferred over to the consumers.

Even if the trade deal comes in place in the next few weeks, there probably won't be a boost in business investments in China. Business investments plans for most companies are probably already decided, a trade deal will most likely be affecting next year’s investments plans.

Eurozone’s retail sales rose by 0.4% from January to February, a little better than the market has expected, though, the numbers for January got revised down. Overall, the trend in consumer spending is still positive .

Indices for 4th of April. Signs of an end to the trade conflict had led to positive close in the US stock exchanges yesterday.

Dow: +0.2% (3rd of April)
S&P 500: +0.2% (3rd of April)
Nasdaq: +0.6% (3rd of April)
Nikkei: Unchanged (4th of April)
Chinese indices: +0.6% (4th of April)
STOXX Europe 600 Index: -0.27% (4th of April)

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