By Lorcan Roche Kelly
No deal… yet
President Donald Trump said the U.S. is “doing very well with China” and that talks between both sides are continuing, while signalling that he isn’t ready to sign a trade deal yet. Speaking to reporters in New Jersey yesterday, Trump also said he would make a decision today on renewing licenses for U.S. companies to trade with Huawei Technologies Co. The tariffs already in place are putting Apple Inc. at a competitive disadvantage relative to its chief competitor Samsung Electronics, the company’s CEO Tim Cook told Trump over dinner on Friday, with the president saying he made a “good case.”
This week is likely to be dominated by monetary speculation across three continents. The People’s Bank of China announced that from tomorrow new loans must be priced “mainly” to a revamped benchmark called the Loan Prime Rate, seen as another move toward market-based interest rates. In Europe, weaker-than-forecast inflation numbers this morning will only serve to increase speculation about further European Central Bank easing at the September meeting. Finally, it is Jackson Hole conference week, with Federal Reserve Chairman Jerome Powell’s address on Fridayexpected to all but confirm another rate cut next month.
U.K. opposition leader Jeremy Corbyn promised to do “everything necessary” to prevent a no-deal Brexit as the odds of a snap general election remain high. It comes after Corbyn’s idea to install himself as a temporary Prime Minister failed to gain enough support. Meanwhile, the drama in Italy continues, with the strongest indication yet that Deputy Premier Matteo Salvini’s push for power is running into trouble. Leading members of the opposition Democratic Party said they should support anti-establishment Five Star Movement’s fight against Salvini’s efforts to push out Prime Minister Giuseppe Conte. In surprising news, German Finance Minister Olaf Scholz is talking about the possibility of increasing spending should an economic crisis hit the country.
Overnight, the MSCI Asia Pacific Index rose 0.8% while Japan’s Topix index closed 0.6% higher as optimism over the trade outlook was boosted by Trump’s comments. In Europe, the Stoxx 600 Index gained 0.6% by 5:50 a.m. Eastern Time with trade hopes again the catalyst for the move. It’s a similar story in the U.S. where S&P futures pointed to a positive open, the 10-year Treasury yield was at 1.623% and gold slipped below $1,500.
It’s the Monday of the third week in August, so needless to say, things are very quiet. There is no economic data of note scheduled for the U.S. today. In earnings, Baidu Inc. and Weibo Corp. are about the only reports of note. If you’re looking for something interesting to do, it might be fun to slowly track the freshly re-named Iranian tanker as it makes its way across the Mediterranean.