Archives of “January 2020” month

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US Treas Sec Mnuchin says tariffs on China to remain in place until phase 2

  
  Analysis
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US Treasury Secretary Mnuchin

  • says tariffs will stay in place until there’s a phase 2 of china trade agreement
  • says Trump may consider removing tariffs under phase 2
  • says China has made strong commitments it will not manipulate currency

US Treasury Secretary Mnuchin 

S&P 500 falls 5 points after touching record

  
Analysis, US Market

Tariff story turned markets

Maybe markets had run too far or maybe they turned on a report saying there was no agreement to further reduce US tariffs on China as part of the deal. That’s not a surprise but it was a reminder that it’s not exactly peace-and-love between Beijing and Washington. The signing ceremony and deal publication are tomorrow.
  • S&P 500 down 5 points to 3283 after hitting record 3294
  • DJIA +0.1%
  • Nasdaq -0.2%

Risk-reward attractive for selling CHF against the USD and EUR – Citi

  
Analysis, Forex

Citi has a close eye on the Swiss franc

Citi discusses the CHF outlook and flags a scope for long USD/CHF and long EUR/CHF to outperform over the coming weeks on the back of the following 4 reasons.

“(i) the SNB will continue to intervene given current levels of EURCHF and USDCHF;

(ii) risk aversion on a US-Iran deescalation should diminish;

(iii) troughing data in Europe will be short-term negative CHF; and

(iv) technical levels and price action make risk/reward attractive,” Citi notes.

Unanswered phase one deal question is what imports China commits to (and the caveats)

  
Analysis, Politics
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Will there be a hard target? What about pricing?

Will there be a hard target? What about pricing?
Reuters today reports that China has pledged to buy nearly an additional $80 billion in manufactured goods from the US over the next two years plus $50B more in energy supplies. The deal also calls for Chinese purchases of agricultural goods to increase $32B over two years and imports of US services by about $35 billion.
However some of the details may be kept secret and instead we would get targets for four broad areas: energy, manufacturing, services and agriculture with a total near $200B above the 2017 baseline.
From the Chinese side they risk running afoul of WTO rules and the multilateral system they’re trying to uphold. However that could be mitigated by provisions in the deal that say the US will have to provide the goods at competitive prices.
Global Times editor (and party mouthpiece) Hu Xijin appeared to confirm the deal with that caveat:
As far as I know, China did make a commitment to expand imports from the US. China has a huge market which is growing quickly. It will be more of a test for the US whether it can provide enough products that Chinese market welcomes and are competitive in price.

US, EU and Japan seek tougher WTO rules on industrial subsidies

  
  Analysis
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China targeted

Yesterday the US rolled out the red carpet for the phase one signing ceremony by removing the ‘currency manipulator’ designation but today they’ve joined up with the EU and Japan to seek tougher WTO rules. They reached a deal to expand the WTO’s list of illegal aid.
The trio also discussed rules to prevent tech transfers.

US president Trump to attend World Economic Forum annual meeting in Davos on 21-24 January

  
  Analysis
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The WEF confirms, releasing a list of attendees for the event

Trump

The US delegation will also comprise of Mnuchin, Ross and Lighthizer. From the EU camp, the notable attendees will be ECB president Lagarde as well as European Commission president von der Leyen.

Something to look forward to next week after the trade deal with China is all wrapped up.

Iran’s Rouhani gives assurance that plane crash incident will not be repeated

  
Analysis, Politics

Well, it should have never even happened in the first place

Ukraine airline
  • Iran admits it accidentally shot down Ukrainian airliner
Rouhani goes on to note that the incident was an unforgivable error and that it should be investigated carefully, with those involved in the incident will be punished.
It’s a really tragic event and no doubt it will raise questions about the safety of Iranian airspace over the next few years at the very least – or even permanently.
The way Iran has handled the situation has been rather poor but at least they have admitted their wrongdoings in denying the allegation previously. Hopefully those affected by the tragedy will get more closure in due time.

China to buy ~$80 billion more of US manufactured goods over two years in Phase One trade deal – report

  
  Analysis

Reuters reports on the matter

US China

The nearly $80 billion more worth of US manufactured goods is based off the 2017 baseline figure, according to sources cited by Reuters. Adding that the purchase increase will include autos, auto parts, aircraft, agricultural machinery and medical devices.

The sources also says that the trade deal includes increased Chinese purchases of $50 billion in energy, $32 billion in farm products and $35 billion in services over two years.
A bit of some mixed numbers relative to an earlier report here by Politico but the total figure comes up to around $200 billion still. It makes you wonder whether there is a particular firm commitment on each sub-section but we’ll see in due course.

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