Trump hinted last week that it would be better “to wait until after the election for the China deal” and that he had no deadline in mind. Equities had a small selloff on Monday as a result but finished the week positive. The comments come a week after the US House passed the Hong Kong bill and China hardened its stance by demanding all US tariffs be rolled back before striking any deal. Despite the apparent widening between parties, China will continue working on tax exemptions for soybeans and pork imported from the US. However, this may be a policy of necessity as the African swine fever outbreak this year has wiped out an estimated 300 million or almost half of China’s pigs.
Another round of 15% tariffs is scheduled for December 15 on the remaining ~$150 billion of Chinese imports; a deal and repeal by then remains uncertain. In Europe, Trump is now vowing to retaliate against a 3% revenue tax on digital company earnings in France, targeting items such as cheese and luxury handbags. This comes days after tariffs were proposed against Brazilian and Argentine steel and aluminum. France is a top 10 exporter to the US but the entire European Union (EU) is second after China., The concern for market participants would be this spiraling into another large-scale trade war if other EU members are dragged into the fight.
PMI and ISM manufacturing indices showed mixed results for November. Construction spending was slower than expected. Consumer sentiment is up for December, exceeding expectations. Labor markets continue to roar with a huge beat on new jobs for November, especially in manufacturing. The unemployment rate now sits at 3.5%, a number not seen since 1969.
This week will feature releases on CPI, PPI, and retail sales, in addition to the last Federal Reserve meeting for the year.
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