Any deal turned out to be better than no deal, but this
USA – China trade deal “lite” phase one raises many questions and doubts.
The biggest doubt of all, will the unpredictable President
Trump stick to it? He has a track record of changing the rules as he goes
along.
Another doubt is China’s ability and need to buy 100
billion a year for two years of US goods and services, all the more so if the
global economy enters a recession.
Tinkering with the tariffs rather than dropping most of
them is a big miss too.
Below, that deal finally got signed. Now on to all the
fun of an impeachment trial starting next week.
World stocks pause at record peak
as markets assess U.S.-China deal
January 16, 2020 /
12:57 AM
TOKYO
(Reuters) - World stocks inched ahead to a record high on Thursday after the
United States and China signed an initial deal to defuse their 18-month trade
war, though financial markets were wary as a number of thorny issues remained
unresolved.
MSCI’s broadest index of world stocks firmed 0.04% in early trade after
closing at record level on Wednesday while its index on Asia-Pacific shares
outside Japan rose 0.21%.
Japan’s Nikkei rose 0.14% while mainland China’s Shanghai composite
index was almost flat.
U.S. President Donald Trump and Chinese Vice Premier Liu He on Wednesday
signed a deal that will roll back some tariffs and see China boost purchases of
U.S. goods and services by $200 billion over two years.
“Whether somebody looks at this as big progress or little progress, it
is something tangible and so the arrow is pointing in a direction that the
market is comfortable with,” said Chuck Carlson, chief executive officer of
Horizon Investment Services at Hammond, Indiana in the United States.
The Phase 1 deal however does not fully eliminate the tariffs while the
$200 billion purchase targets, which include energy, farm and manufacturing
products, look daunting to achieve.
----On the Wall Street, the S&P 500 closed at a
record high of 3,289.3 points, up 0.19%, with gains fairly small after the
market has rallied for months on hopes of a deal.
The index was dragged down by fall in financial shares following
lacklustre earnings from Bank of America and Goldman Sachs.
“While the trade deal has provided a relief, there wasn’t any positive
surprises for markets. For shares to rise further, we need more evidences of
improvement in the real economy and earnings,” said Hirokazu Kabeya, chief
global strategist at Daiwa Securities.
Concerns linger after U.S. and
China sign initial trade deal
January 15, 2020 /
6:10 AM
BEIJING/WASHINGTON
(Reuters) - China will boost purchases of U.S. goods and services by $200
billion (153.35 billion pounds) over two years in exchange for the rolling back
of some tariffs under an initial trade deal signed by the world’s two largest
economies, defusing an 18-month row that has hit global growth.
Key world stock market indexes climbed to record highs on news of the deal,
before stalling on concerns it may fail to ease tensions, with numerous thorny
issues unresolved. Oil prices rose, helped by expectations of more Chinese
purchases of U.S. oil and gas.
While acknowledging the need for further negotiations with China to
solve a host of other problems, President Donald Trump hailed the agreement as
a win for the U.S. economy and his administration’s trade policies.
“Together, we are righting the wrongs of the past and delivering a
future of economic justice and security for American workers, farmers and
families,” Trump said in rambling remarks at the White House alongside U.S. and
Chinese officials on Wednesday.
Chinese Vice Premier Liu He read a letter from President Xi Jinping in
which the Chinese leader praised the deal as a sign the two countries could
resolve their differences with dialogue.
“While markets seemed to take this deal as a risk-on signal, we should
all be aware that headlines about trade, particularly U.S. China trade, are
going to be a constant feature of 2020,” said Hannah Anderson, Global Markets
Strategist, J.P. Morgan Asset Management in Hong Kong.
The centerpiece of the deal is a pledge by China to purchase at least an
additional $200 billion worth of U.S. farm products and other goods and services
over two years, above a baseline of $186 billion in purchases in 2017, the
White House said.
Commitments include $54 billion in additional energy purchases, $78
billion in additional manufacturing purchases, $32 billion more in farm
products, and $38 billion in services, according to deal documents released by
the White House and China’s Finance Ministry.
----The
deal does not end retaliatory tariffs on American farm exports, makes farmers
“increasingly reliant” on Chinese state-controlled purchases, and does not
address “big structural changes,” Michelle Erickson-Jones, a wheat farmer and
spokeswoman for Farmers for Free Trade, said in a statement.
Trump, who has embraced an “America First” policy aimed at rebalancing
global trade in favour of U.S. companies and workers, said China had pledged
action to confront the problem of pirated or counterfeited goods and said the
deal included strong protection of intellectual property rights.
The last time this ‘clear danger
sign’ flashed in the stock market was in 1999, and we all know what happened
next
By
Shawn Langlois Published: Jan 15, 2020
3:19 pm ET
Brad
Lamensdorf, portfolio manager for AdvisorShares Ranger Equity Bear ETF HDGE-0.19% ,
used that expression to describe what he sees in his “Chart of the Week,” which, he says, should give investors
cause for concern.
----The chart, pulled from a recent Wall Street Journal story, essentially shows how
much red ink is spilling in the IPO market. As you can see, the last time this
“clear danger sign” popped up was on the brink of the dot-com implosion in
1999.
As the Journal pointed out, 42% of these money-losers come from
the health-care sector, where investors look to make a killing on smaller
biotech stocks with big upside. Another 17% come from the technology sector.
“Over-priced IPOs usually occur toward the end of a long
bull run when stocks in general become very overpriced,” Lamensdorf wrote. “Why
does this happen? Generally because investors have lost their sense of reality.
They are willing to buy stocks on hyped stories instead of the facts.”
In other words, investment bankers, he explained, pounce on
the opportunity to stuff the stock market — or, as the expression goes, feed
the pigs — with overpriced companies as long as the public has an appetite for
risk.
Following the markets on both sides of the Atlantic since 1968. A dinosaur, who evolved with the financial system as it was perverted from capitalism to banksterism after the great Nixonian error of abandoning the dollar's link to gold instead of simply revaluing gold. Our money is too important to be left to probity challenged central banksters and crooked politicians.
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