By Lorcan Roche Kelly
Boeing’s decision to halt production of the 737 Max in January will add a headwind for the U.S. economy in 2020. The company said the indefinite shutdown would lead to no layoffs or furloughs for now, but economists see the rate of U.S. growth for the first quarter hit by around 0.6% from the move. The pressure on Boeing’s finances is mounting, with the company’s operating cash flow in the third quarter below the weakest performance during the 2008 financial crisis.
The British pound was trading at pre-election levels this morning after Prime Minister Boris Johnson moved to introduce legislation to guarantee no extension to the post-Brexit transition period. Sabine Weyand, director general for trade in the European Commission, warned of a “cliff-edge situation” if the U.K. stuck to a hard deadline for negotiations. Top EU officials have already warned the current timetable may be too tight to wrap up agreements.
The world breathed a sigh of relief at last week’s announcement of an agreement on a phase-one trade deal between the U.S. and China that averted a fresh onslaught of tariffs over the weekend, but the details of what was actually agreed remained elusive. The accord, yet to be officially signed, does call for a large increase in purchases of U.S. agricultural products which China may struggle to meet. The country plans to increase ethanol imports as part of that goal, but also may reroute imports via Hong Kong to other mainland ports, according to people familiar with the matter. Such a move would put further pressure on Hong Kong’s battered economy while leading to no increase in net U.S. exports.
The recent rally in global equities is taking a break today as the trade-deal bounce fades. Overnight, the MSCI Asia Pacific Index added 0.8% while Japan’s Topix index closed 0.6% higher with drugmakers leading the gains. In Europe, the Stoxx 600 Index was 0.8% lower at 5:45 a.m. Eastern Time with banks and consumer discretionary stocks among the biggest losers. S&P 500 futures also moved lower, the 10-year Treasury yield was at 1.857% and gold was higher.
U.S. housing starts and building permits numbers are published at 8:30 a.m. Factory output for November is expected to show a strong rebound when the data is released at 9:15 a.m. as the impact of strikes at carmakers ebbs. October job openings is at 10:00 a.m. Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren speak today. FedEx Corp. reports earnings.