What a difference a day makes – or a even a few weeks…
Just a few week’s ago, President Trump was ramping up additional tariffs after China retaliated with a return salvo as new tariffs came in to force from both sides on 1st September 2019.
Markets fell back after reacting badly to Trumps tweets and tariff increases. The Dow fell over 600 point plus in one day.
Concessions and the tariff turn-a-round
Confirmation soon came that high level trade talks were to resume in Washington in October as China prepared to send a delegation to re-start talks.
Then, China announced it was to exclude 16 products from tariff measures. Trump quickly reciprocated in kind delaying his latest tariffs as a goodwill gesture.
And then today came the news that ‘low level’ talks would start this week, much sooner than expected – paving the way for trade talks to begin at a higher level in the coming weeks.
Will there soon be a U.S. – China trade war breakthrough?
Some analysts now believe there is a greater chance of a breakthrough this time round. I guess, after a year or more of talks and 11 or so meetings it’s quite likely a solution would be found eventually.
Bearing in mind that only just weeks ago the news was full of analysts reports of global recession doom and gloom. Eventually the markets will reverse and just maybe that is closer than we all think.
As all this news ebbed and flowed, the markets gained, with the Dow only breaking a straight 8 day gain on Monday with news of the attack on a Saudi oil facility. During this period, the Dow closed in on an all time high, again. It is very likely that when a ‘deal’ is finally reached, markets will react favourably. But after that, who knows…?
So what BIG events do we know of that will likely move the markets during the next few weeks?
My thoughts…
- U.S. – China trade resolution – this is the big one, and a positive announcement will move markets up!
- Federal Reserve interest rate decision – a cut will move markets up, even if only temporarily.
- Brexit – ongoing at least until 31/10/2019 – but an early breakthrough with a ‘remain’ result will lift markets. A ‘no-deal’ outcome will have the opposite effect.
- Ongoing tensions with Iran.
- Euro Zone falling into recession – Germany first?
- Global economic slowdown.
- U.S. reporting season will be upon us again in October/November.
Deal time?
Trump wants a deal as he begins his campaign for 2020 re-election. China wants a deal to prevent or at least slow and possibly even reverse the effect of ‘decoupling’ as U.S. businesses move manufacturing away from China.
‘Decoupling’ is probably now seen as the greater of the threats to China combined with that of a slowing economy.
Do trade trade barriers, such as tariffs, ever really work? Does anyone actually win a tariff trade war?