Revenue Exposure to China
Archives of “May 23, 2019” day
rssTrump set to unveil $16bn aid package for US farmers
Donald Trump is poised to announce a $16bn aid package for farmers to compensate them for losses due to the escalating US trade war with China, senior US agriculture department officials said on Thursday.
The bailout marks the second multibillion-dollar move by the US president to help farmers in as many years, as he tries to contain the damage from retaliatory tariffs imposed by China during the commercial conflict, which have sharply reduced US exports to the Chinese market.
“While the farmers would rather have trade than aid, if they don’t have trade they need aid, and that’s what it is,” Sonny Perdue, the US agriculture secretary, said.
US officials said the package was composed of direct payments to farmers worth $14.5bn, as well as $1.4bn in government purchases of agricultural goods to be distributed to food banks and impoverished Americans. Mr Trump said earlier this month that he wanted to direct farm purchases to poor countries as food aid in the package, but that option was discarded.
US officials said the payments would be made in three tranches — with the first coming in July and August. Mr Perdue said it was unlikely that a deal to end the trade war would happen before then, even with a meeting expected between Mr Trump and Xi Jinping, the Chinese president, at the G20 leaders’ summit next month in Japan.
“While we would love a trade deal in that period of time . . . it’ll be very difficult to understand how a trade deal could be consummated prior to that first payment, or first tranche there,” Mr Perdue said, adding that the second disbursement, expected in November or December, and the third payment, would be dependent on the trade talks.
European shares end with sharp losses on global growth concerns
PMI data in Japan, Europe and US not that great
The PMI data out of Japan, Europe and the US was admittedly not that great today. There was hope that the global headwinds was abating. The data today weakens that view.
Stocks in the Europe (and the US) have reflected that shift (at least for now).
The closes for the European market are showing:
- German DAX, -1.77%
- Francis, -1.81%
- UK’s FTSE, -1.42%
- Spain’s Ibex, -1.26%
- Italy’s FTSE MIB, -2.0%
FTs Payne: Speculation chatter on PM May’s announced resignation schedule
The latest from the tweeters
Sebastian Payne from the FT is out with the latest tweet on the rumoured schedule for PM May”s resignation. He is hearing that May will announce on Friday, her proposed last day of June 10th after the Trump visit.
Nothing for nothing but would Pres. Trump be excited about meeting with the the lamest of ducks May anyway (what is he going to give her a retirement gift at that time?). I gotta think he might cancel those meetings in favor of meeting the new PM. So why prolong the inevitable?
US initial jobless claims 211K vs 215K estimate
Weekly US initial jobless claims
- initial jobless claims common little stronger than expectations of 211K versus 215K
- The prior week remains unchanged at 212K
- continuing claims 1676K versus 166K estimate
- prior week revised to 1664K versus 1660K
- The four-week average for claims false to 220.25K versus 225.0K
- The largest increases in initial claims for the week ending May 4 were in New York (+9,365), Illinois (+2,010), Missouri (+791), Kansas (+754), and Iowa (+676),
- The largest decreases were in New Jersey (-6,239), Connecticut (-3,208), California (-1,920), Arizona (-668), and Wisconsin (-661).
US’ Pompeo: There is a real risk from China towards US national security
US secretary of state, Mike Pompeo, speaks to CNBC
- Says that he believes US companies will cut ties with Huawei
- Says Huawei is deeply tied to China and its Communist Party
- Says that Huawei is making false statements
- Believes that China is using high-tech surveillance to subdue minorities
Pompeo is saying that Huawei had “an enormous national security component to it”, adding that its connection with the Chinese government “puts American information at risk”. While I don’t doubt that, I reckon the whole situation could’ve been handled in a more cordial fashion had it not been for the trade dispute that has been going on.
Nonetheless, the fact that the US is defending their actions and China is drawing a hard line on their own stance means that the dispute here isn’t going to settle down any time soon. And that isn’t going to help the nervousness in markets today.
Germany May Ifo business climate index 97.9 vs 99.1 expected
Latest data released by Ifo – 23 May 2019
- Prior 99.2
- Expectations 95.3 vs 95.0 expected
- Prior 95.2
- Current assessment 100.6 vs 103.5 expected
- Prior 103.3
Slight delay in the release by the source. A measure of business conditions and sentiment/expectations towards the German economy. Do be reminded the Ifo changed the indicator measurement to take into account of services data too as of April 2018.
The drop in the headline reading sees it fall to the weakest since November 2014 as business sentiment towards the German economy continues to weaken. The outlook improved slightly but it isn’t an area of confidence given that trade tensions and potential auto tariffs are still issues to worry about looking forward.
Eurozone May flash manufacturing PMI 47.7 vs 48.1 expected
Latest data released by Markit – 23 May 2019
- Prior 47.9
- Services PMI 52.5 vs 53.0 expected
- Prior 52.8
- Composite PMI 51.6 vs 51.7 expected
- Prior 51.5
Both the manufacturing and services prints disappointed and fell below their April estimates but the composite reading is seen holding steady somewhat. The slight drag on the data alongside weaker Ifo survey data sees EUR/USD slip a little to 1.1136 from around 1.1145 earlier but overall it’s not much of a change really in euro sentiment.
The data more or less confirms that economic conditions are still somewhat stable but any robust signs of a recovery from last year’s decline is still a long way from coming.
China says that wrong actions from the US has escalated trade frictions greatly
Comments by China’s commerce ministry
- Says that US actions have increased chances of a global economic recession
- Urges US to stop abusing domestic laws to sanction Chinese firms
- Says that China will adopt necessary measures to safeguard its firms’ interests
Fighting words like these won’t really help ease the risk mood we’re seeing so far today. US equity futures have slipped to fresh lows, down by 0.7% now as risk-off sentiment starts to gain further momentum on the session.
Eurostoxx futures -0.7% in early European trading
The softer risk tones extend to Europe in early trades
- German DAX futures -0.7%
- French CAC 40 futures -0.6%
- UK FTSE futures -0.6%
This mainly reflects the mood seen in US equity futures, which are down by 0.5% now. Risk sentiment remains slightly on the cautious side as we begin trading on the session with the undertones from US-China trade tensions still weighing on markets this week.
For today, look towards euro area PMI data for more clues as further deterioration in economic conditions in the region could spark more safety flows on fears that the global economic slowdown is worsening.