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AUTHOR: Jason J. Roque, CFP®, APMA®
TITLE: Investment Adviser Rep – CCO TAGS: Trade, Japan, Europe |
Most of the moves over the last week were motivated by favorable trade circumstances. Is it background noise or the real reason for growth?
US/China Trade
The trade dispute between the US and China took a major step forward and backward last week. Concessions regarding intellectual property were agreed to by China. This has been a central theme of US demands throughout the dispute. The major step backward is still to be determined as China vowed to retaliate for Trump signing off on the Hong Kong human rights bill.
Japan
Continued accommodation is being recommended by the International Monetary Fund (IMF). At the same time, they are recommending a ratcheting of sales taxes over the next decade, that would likely be impossible in the face of another recession. The Bank of Japan affirms that they are still in an accommodative stance, but they have suffered a 14% fall in consumption since raising the sales tax from 8% to 10%.
Europe
Consumer sentiment in Germany rose for December. Given recent weakness in the German economy, optimism is welcome. Economic strength is needed as another negative quarterly GDP reading would put Germany in a recession. The UK is preparing for a general election on December 12th and the conservatives hold a strong lead. This is a decidedly pro-Brexit indication. This means the deal currently brokered with the EU would likely pass and the UK would leave the EU 1-31-2020.
Conclusion
The weeks economic data was light. New Homes sales fell slightly, as did CB consumer confidence. The lone bright spot was improved core durable goods orders. With the data not in support of market moves trade truly carried the week. It may be serving as a decent distraction until corporate spending returns. It has provided some favorable noise in the mean time.
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