Though President Trump threatened to move ahead with additional tariffs on Chinese goods at the beginning of the week, China and the United States eventually agreed to a ceasefire in their rancorous trade dispute on Saturday at the G20 summit. On the one hand, Trump will not boost tariffs on $200bn of Chinese goods from 10% to 25% on January 1st 2019. On the other hand, China will “purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other products from the United States to reduce the trade imbalance between both countries”. In a nutshell, it seems to be a suspension of the escalation of the trade war but uncertainties will continue to prevail in the coming weeks due to the lack of details.
Consequently, we can wonder whether this agreement can result in a renewed risk-on mood, even though equity markets were already moving ahead after Jerome Powell’s speech on Wednesday 28th confirming interest rates were just “below neutral”. Most economists estimate the “neutral” rate at around 300bps while the current effective Fed funds rate is sitting at 220bps.
His comments sent global stocks soaring, the Dow Jones Industrial Average and the S&P500 rose by 5.16 and 4.85 percent WTD respectively. The trend was much smaller in Europe (MSCI EMU climbing by only 1.04 percent), probably due to developments surrounding Brexit and ‘yellow jacket’ riots. In the meantime, the long-term U.S. Treasury yields slid slowly downwards (10-Year T-bond yield now at 299bps).
Lastly, after declining for seven straight weeks, oil prices rebounded slightly as OPEC’s advisory committee suggested decreasing production by 1.3 million barrels per day from last month’s levels. For the week, the WTI crude rose about 1 percent. Not enough for the energy sector (+3.54 percent) to perform in line with the broader market, despite the inflows recorded at the end of the month. Among the best sectors this week, the performance exhibited by consumer discretionary (+6.43 percent) and healthcare (+5.90 percent) should be noted. Materials (2.40 percent) and utilities (+2.70 percent) lagged behind.
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2018-11-30/global