Weekly Market Commentary
US equity markets continued to book gains and recover from the slaughter experienced in the final quarter of 2018. The key reasons for this dramatic reversal in fortune, has been the progress and process of the US/China trade negotiations and the Fed halting their hawkish monetary policy. The US/China trade talks appear to be coming to a successful conclusion, with the drafting of a 'MOU' and preparations have begun for a summit at Mar-a-Lago in March. The headline deal will drive the global growth narrative, but as usual, the devil is in the detail. There are rumours that the Chinese have driven a hard bargain and resisted any structural reform, restricting the agreement to one that addresses the trade imbalance directly and not the root cause. This would be a failure and not emblematic of the Trump reputation.
The talk is now that Trump will sign this deal and move on to addressing the EU/US trade imbalance. The EU had agreed to a deal, notionally, but Trump is going to revisit this. The talk is that he will threaten the EU with tariffs on vehicles and parts, while the EU is responding with threats surrounding taxes on heavy machinery. This did not assist the EUR, which slipped back to 1.1340, not assisted by a slew of weaker economic data. Germany is under serious pressure, with talk of imminent recession, hit by Brexit chaos and now external trade pressures. The Brexit turmoil continues in the UK, as political party lines are beginning to disintegrate, with the country torn apart. Despite this the economy continues to roll-on and the GBP trade 1.3060.
The AUD managed to stage a recovery, pushing back up to 0.7130, after assurances surrounding Australian coal exports to China. Australian PM Morrison with NZ PM Adern held a summit in NZ, which produced very little outside lots of dental flashes, but did allow the Australian PM the opportunity to dispel fears over Australian coal exports to China. This is a much bigger problem than Australian and NZ Governments wish to admit. The Chinese are ropable about the rejection of Huawei's inclusion in the development of 5G networks in Western countries. They are bringing trade pressures to bear on Australia and NZ. China is the #1 export market for both countries and the Chinese will hit them where it hurts. The Chinese are concluding a trade agreement with the USA which allows them plenty of alternative suppliers, in the form of the USA. The US/China trade war has been a drag on these trade exposed currencies and a successful conclusion was seen as a boon to the performance of their economies and currencies. This development would be dramatic and detrimental.
Weekly Market Calendar
25/2 NZ Retail Sales, US Retail Sales, Chicago Fed National Activity Index, Dallas Fed Manufacturing Activity
26/2 Australian Consumer Confidence, German Consumer Confidence, US Home Sales, US Building Permits, S&P Case Shiller Home Price Index, Richmond Fed Manufacturing Index, US Consumer Confidence
27/2 NZ Trade Exports/Imports, German Retail Sales, EU Consumer Confidence, US Weekly Mortgage Applications, US Trade, US Pending Home Sales, US Factory Orders, US Durable Goods Orders
28/2 Japan Industrial Production, Japan Retail Sales, NZ Business Confidence, Japan Consumer Confidence, China Manufacturing/Non-Manufacturing/Composite PMI, France GDP, German CPI, US Weekly Jobless Claims, US GDP, US Personal Income/Spending, US GDP, Kansas City Fed Manufacturing Activity
1/3 NZ Consumer Confidence, Australian Manufacturing PMI, NZ Building Permits, Japan Employment, Japan CPI, Japan Manufacturing PMI, Japan Consumer Confidence, Australia Commodity Prices, France/German/EU Manufacturing PMI, German Employment, UK Manufacturing PMI, EU Employment, EU CPI, US Personal Income/Spending, US Manufacturing, US Employment, University of Michigan Sentiment
Paul Bettany
Collinson & Co
0406-744-923
paul@collinsonfx.com