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Details of phase one deal released as Trump and Lui He sign documents

  
  Analysis
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Trump and Lui He sign deal

Trump and Lui He sign deal
  • Agreement prohibits misappropriation of trade secrets through electronic surveillance
  • Require forfeiture of machinery used to produce counterfeit goods
  • Agreement effective 30 days after signing
  • Deal calls for $200 billion in added Chinese purchases of US goods above 2017 levels
  • Lighthizer says it is not administrations intention to wait until after November elections for phase two deal
  • Lighthizer says only way for further tariff reductions is a phase two deal
  • China to import no less than $12.5B above 2017 baseline for agricultural goods in 2020 and +$19.5B in 2021
  • Market conditions, particularly in the case of agricultural goods ,may dictate the timing of purchases within any given year
More purchase details:
  • China to buy $12.8B more in services this year, $25.1B in second year
  • To buy $18.5B more in energy this year, $33.9B in second year
  • To buy $12.5B more in manufactured goods this year, $44.8B in second year
  • The outline of this was leaked yesterday
Those are some big numbers. I would love to see more details on what China plans to buy, especially in something less-fungible like manufacturing.

US stocks stumble after hitting record highs

  
Analysis, US Market
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Closing changes for North American trade on January 10, 2020:

Closing changes for North American trade on January 10, 2020:
On the day:
  • S&P 500 down 9 points to 3265 after hitting 3282 (-0.3%)
  • DJIA down 133 points to 28823
  • Nasdaq down 24 points to 9178

On the week:

  • S&P 500 up 0.9%
  • DJIA up 0.7%
  • Nasdaq +1.75%

The turnaround today is a bit of warning signal. Note that January is a weak seasonal month but there is a long-term trend of strength early in the month. I also tend to think the signing of the ‘phase one’ deal is sell-the-fact risk.

Day 1 of 2020 and record closes for the major indices, and at session highs too.

  
Analysis, US Market
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NASDAQ index leads the way with a gain over 1.33%

It is day one of 2020 and the major indices are all closing at record levels. The NASDAQ index is leading the way with a gain over 1%.
The final numbers are showing:
  • S&P index rose 27.21 points or 0.84% to 3257.98. The high price was at 3258.14. The low extended to 3235.53
  • NASDAQ index rose 119.58 points or 1.33% to 9092.18. The high reached 9093.43. The low extended to 9010.89
  • Dow industrial average rose 331.51 points or 1.16% to 28869.95. The high reached 28872.80. The low extended to 28627.77
It is only one day, but the markets are starting off with a flourish in 2020.  Apple reached $300.00 and is closing above the $300 level for the first time ever (closing at $300.35).   For the day Apple rose $6.70 or 2.28%.
Other big gainers among the big names include:
  • AMD, +7.06%
  • Tencent, +3.77%
  • Alibaba, +3.61%
  • Northrop Grumman rose 3.39%
  • micron, +3.03%
  • Tesla, +2.87%
  • Amazon rose 2.72%
  • Salesforce rose 2.69%
  • Disney rose to 2.43%
  • PayPal rose 2.39%
  • Apple rose 2.28%
  • Facebook rose 2.21%
  • Alphabet rose 2.19%

Laggards include:

  • General Mills, -2.67%
  • Target, -1.68%
  • Bristol-Myers Squibb, -1.23%
  • Procter & Gamble, -1.15%
  • Costco, -0.83%
  • Papa John’s, -0.46%
  • Coca-Cola, -0.63%
  • Wells Fargo, -0.04%

Trump has signed off on China trade deal – report

  
  Analysis
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Report from Bloomberg’s Jennifer Jacobs:

The deal Trump’s trade negotiators presented to the president includes a delay in the Dec. 15 new round of tariffs, sources tell me. The trade meeting is over, and the president has signed off.
Report from Bloomberg's Jennifer Jacobs:This was expected at this point but there was a small risk he would change his mind.
  
  Analysis
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Highlights of the FOMC decision on December 11, 2019:

  • At the prior decision on October 30, the Fed cut rates 25 bps
  • The market has priced in virtually no chance of rate move through February
  • IOER 1.55% vs 1.55% prior
  • Fed drops language about ‘uncertainties about this outlook remain’
  • Vote was unanimous
  • “The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate”
  • No changes in the economic outlook paragraph
  • Says “the current stance of monetary policy is appropriate”
  • Leaves forecasts for GDP and inflation unchanged, lowers unemployment
  • Median forecast is for one rate hike in 2021 and one in 2022

Dropping the language about uncertainties is moderately hawkish. However the market is basically unmoved in the aftermath. The Fed is clearly signaling that it’s on the sidelines here.

China likes Trump as US president: a “business man”, “would be glad to have him re-elected”

  
  Analysis
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Despite the US-China tensions it seems China is very happy to be negotiating with US President Trump.

Washington Post carries the endorsement:
  • “Trump is a businessman. We can just pay him money and the problems will be solved,” said a politically connected person in Beijing, speaking on the condition of anonymity 
  • he is “easy to read,” said Long Yongtu, a former vice minister of foreign trade
  • “We want Trump to be reelected; we would be glad to see that happen.”
Its worth checking out the article, there is plenty more. Here is the link and it isn’t long.
It makes the ‘China is waiting it out until after the US election’ point of view less valid?
China is very happy to be negotiating with US President Trump.

Ray Dalio debunks WSJ story about his bearish position

  
  Analysis
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Ray Dalio from Bridgewater Associates responsed to WSJ article

It was reported by the Wall Street Journal earlier today that Ray Dalio from Bridgewater Associates had a 1.5 billion bearish option position on the S&P and Eurostoxx 600 index.
Dalio is out with a tweet debunking the story. He tweets:
 Ray Dalio from Bridgewater Associates responsed to WSJ article
Even if he did, or does,  have a 1.5 billion option position (it is not clear), it would dwarf the money under management (and likely long position).

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.

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