Friday, October 11, 2019
Pre-markets are up big this Friday, which must be due to positive sentiment regarding U.S.-China trade talks, of which President Trump has said are going “very well.” Trump plans to meet with Chinese Vice-Premier Liu He today. The Dow is currently up 300 points, the Nasdaq up 86 and the S&P 500 up 30 — all big upswings.
Import/Export Price Index numbers were released this morning. The headline came in at 0.2% month over month, ex-petrol (volatile fuel) costs -0.1%. Year over year, imports are down 1.6%, better than the -2% expected and the -1.8% reported for August. Exports were down 0.2% for September.
Neither of these headlines ought to shake markets here at home — everyone knows headwinds in arrears are going to display themselves in economic data from past months. What matters, according to the market, are the trade talks between the U.S. and China, and that any possible agreement (on pulling back higher tariffs, etc.) would be a revitalizing tonic. It’s clear, in fact, that there is a real appetite for good news to come out of these talks.
Analysts have been concluding that this trade war has taken its toll on China far worse than it has on the U.S. Here at home, certain farmers in particular industries (like soybeans) are hurting, but the overall economy seems minimally affected. This morning’s Import/Export prices demonstrate that there may be headwinds, but our economy is not in dire straits — at least not as dire as what we’re seeing out of China currently.
Not only is the market pricing in a happy ending in Chinese trade negotiations, but it is also ready to field another Fed rate cut next week, which would bring the nominal rate below 2% for the first time since the first six months of 2018. This would keep the dollar cheaper for longer — especially in light of global headwinds which insist on pushing the U.S. dollar value up — and arguably would be a good sign for publicly traded companies across the board.
That all said, we have plenty of difficulties to parse through over the medium-term. No one believes the trade war is going to evaporate before the weekend, Brexit still hangs over the EU economy and Congress here at home is back in session Monday, which may spell more trouble for the president. But for now, on this rainy Friday morning, market participants are seeing sunny skies.
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