Archives of “November 21, 2019” day

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China remarks earlier offer only a bit-part reprieve to markets

  
  Analysis

No follow through optimism after the China remarks earlier

E-minis 21-11

US futures stay 0.2% lower on the session, down by 5.5 points after the brief spike higher on the China remarks in the past hour.
As mentioned earlier, China may be playing down the disagreements they are having with the US on trade, but it is more of the case that they are not wanting markets to get too carried away in thinking that talks are on the verge of a breakdown.
They continue to keep mum on any progress that is being made and that continues to send ominous signals on how things are playing out at the moment.
Major currencies remain little changed across the board and so far, there isn’t any good reason to go chasing all too much because traders could easily get jerked around by the next set of headlines once again.

Trump weighs exempting Apple from China tariffs

  
  Analysis
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President Donald Trump said on Wednesday after touring a plant that assembles Apple computers that he was considering whether to exempt the U.S. company from tariffs on imports from China.

“We’re looking at that,” Trump said in answer to a reporter’s question about the tariffs, after touring a plant in Austin, Texas, with Apple Chief Executive Tim Cook that assembles the company’s Mac Pro desktop computers.

Cook, who has a strong relationship with Trump, has sought relief for Apple from the U.S. tariffs, which are part of a months-long tit-for-tat trade war between the world’s largest economies.

“The problem we have is you have Samsung. It’s a great company but it’s a competitor of Apple, and it’s not fair if, because we have a trade deal with Korea — we made a great trade deal with South Korea — but we have to treat Apple on a somewhat similar basis as we treat Samsung,” Trump said.

Apple announced in September it would make its new Mac Pro computers in Austin. The announcement came days after U.S. trade regulators approved 10 out of 15 requests for tariff exemptions filed by Apple amid a broader reprieve on levies on computer parts.

Earlier this month, Apple also asked the Trump administration to waive tariffs on Chinese-made Apple Watches, iPhone components and other consumer products.

Trump has made boosting the U.S. manufacturing sector one of the goals of his presidency, taking to Twitter to pressure U.S. companies into keeping jobs at home.

Earlier on Wednesday, Apple said it had started construction of a new campus in Austin that will employ 5,000 workers, with the capacity to grow to 15,000. It is expected to open in 2022.

The verbatim of Trump’s latest comments is another sign the deal is falling apart

  
Analysis, Politics
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Trump spoke in a Q&A at Apple headquarters

Trump at Apple
Keep in mind that Trump said earlier in his comments that they were considering exempting Apple from tariffs. To me, that alone says he is already a couple steps along in the process of adding tariffs, or at least strongly considering it.
The main headlines have been reported already but the last part is where the context matters.
Reporter: Will there be a trade deal in place before the end of the year?
Trump: So, I can tell you this: China would much rather make a trade deal than me?
Reporter: Then why haven’t they?
Trump: Because I haven’t wanted to do it yet.
Reporter: Why haven’t you wanted to do it.
Trump: Because I don’t think they’re stepping up to the level that I want
Reporter: I spoke earlier today with Mr Cook and he said another round of tariffs would be bad for business, it would be bad for the United States (interrupted by Trump)
Trump: You know, here’s what I would say. What do you know? I put in tariffs and everyone said ‘Oh geez, you’re taking in hundreds of billions of dollars’ and everyone said ‘oh that’s going to be bad for the economy’. Well, as you just heard from Tim Cook, we have the strongest economy by far in the world and we’re taking in billions and billions. So we’ll see what happens.

(more…)

Dip-buyers save US stocks from a deeper fall (for now)

  
  Analysis
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Stocks slump on trade headlines

Stocks slump on trade headlines
The main headline today was a report saying US-China talks could extend into 2020 because the sides are deadlocked.
The reaction was quick and the S&P 500 fell as low as 3091. However the dip buyers stepped up to the plate again (are you surprised?) and the index finished at 3108, a loss of 12 points or 0.4%.
Other markets:
  • Nasdaq -0.5%
  • DJIA -0.4%
  • TSX -0.1%
After the close of the market, CNBC reported that the trade talks are ‘in trouble’. Somehow, the story hasn’t gotten any attention, perhaps because it was a live report with no text follow up. We’ll see if it gets some traction in the hour ahead.

How Trump has trapped himself in China talks

  
Analysis, Politics
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He needs to be both tough-on-China and friendly to markets, but he can’t be

He needs to be both tough-on-China and friendly to markets, but he can't be
President Trump faces a dilemma.
If he stays tough on China, he risks hurting markets and in his mind, the Dow Jones Industrial Average is a top barometer for his Presidency.
If he softens on China and signs a deal that rolls back tariffs while getting little in return, he risks getting outflanked on an issue that has united Americans and has Democratic candidates talking tough.
The core belief among market participants is that he will cave on China and try to spin his deal as a good one — similar to what he did on NAFTA. That would keep markets happy.
But Trump may be considering another playbook. Top advisor Peter Navarro doesn’t believe that tariffs will hurt the domestic economy and he’s undoubtedly told Trump that the effects are overrated. At the same time, Trump invited Powell to the White House for an impromptu meeting on Monday and it may have been to feel out how the Fed would react to a deal falling apart.
Trump may believe that markets and the economy will hold up fine if he stays tough on China and Powell cuts.
The line from today’s Reuters report that really stands out to me is this:
Trump and U.S. Trade Representative Robert Lighthizer recognize that rolling back tariffs for a deal that fails to address core intellectual property and technology transfer issues will not be seen as a good deal for the U.S., a person briefed on the matter said.
I don’t think Trump has made up his mind but I do believe he’s weighing both courses of action.

FOMC minutes: Most officials saw rates as well-calibrated

  
  Analysis

Federal Reserve meeting minutes:

  • Most judged level now appropriate barring a ‘material’ reassessment of the outlook
  • ‘A couple’ said Fed should reinforce statement with communications that another rate cut unlikely without signs of a ‘significant slowdown’
  • Many said rate cut warranted due to global weakness and trade uncertainty
  • Some favored keeping rates steady and argued outlook was favorable and inflation expected to rise
  • A couple supported rate cut but said it was a close call
  • Several concerned some banks had reduced capital buffers when the should be rising
  • Discussed that risks to the economic outlook remained tilted to the downside
This has all been well-communicated by the Fed since the meeting. The question I have is how willing they will be to hike rates if there is a China trade deal and some good growth next year. What I heard from Powell was that they’re not going to be hiking for a long time even if there is high inflation but I’m not sure if that was a slip or a signal.
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