Trump signals impending higher tariffs unlikely to be cancelled

Summary:

• US President Donald Trump suggests the US could go ahead with higher tariff rates on Chinese imports

• Wall Street bounces back on Monday, US500 bulls could hope for a more sustained correction

• New Zealand trade data reports the highest imports ever in October

US unlikely to hold off on raising tariffs on China

The year is slowly coming to an end and there are more and more talks about what the United States could do in terms of a possible further escalation of a trade war with China. The newest remarks coming from Donald Trump suggest that the US is likely to push forward with its plans to increase tariff rates on $200 billion of Chinese goods since the beginning of the next year. On top of that, he did not rule out to slap duties on all remaining Chinese imports if negotiations with Chinese President Xi Jinping fail to end up with a trade deal. Let us recall that if the US goes ahead with higher tariffs it would mean that a rate on Chinese imports ($200 billion) would be lifted to 25% from 10%. Trump added that iPhones and laptops imported from China could be hit by new tariffs - 10% - which Americans could “very easily” handle. Thus, it looks that the Trump’s administration is unwilling to hold off on increasing tariffs despite a request from China to do so. What’s more, a tone expressed by the White House clearly indicates that more duties are on the pipeline if no deal in Argentina is reached (negotiations will take place this weekend during the G20 summit in Buenos Aires). Donald Trump said that the only acceptable deal would be if China opens up its economy to allow American companies to compete fairly.

Wall Street rallies on Monday, Asia fails to follow

Note that these comments came after the closing bell on Wall Street hence it did have no impact on the stock market. Nevertheless, despite encouraging gains registered in the US, Asian stocks have been much worse performing. While US indices ended the first trading day this week with gains ranging from 1.55% to 2.1%, Chinese indices are trading 0.4% lower at the time of writing. It seems to reflect a bit more sour mood implying that reaching any deal acceptable by by two sides might be extremely hard to reach.

The SP500 (US500) bounced noticeably higher on Monday. The index has managed to stay above 2600 point so far, it implies that more gains (at least in form of a correction) might come. Source: xStation5

Technically we may notice that the US500 has been able to hold above 2600 points. This level could be quite important for technicians due to the fact that it coincides with the lowest point of the same size correction we had in January. Thus, we may conclude that if this line is broken down, it could push the price yet lower once more traders step in the bearish side. At this stage we may imagine that purchasers could take a stab at heading toward 2815 points in the nearest time but further performance could be strongly dependent on trade developments. Looking into the best performing index - NASDAQ (US100) - we can notice that Amazon was among the leaders taking advantage of a buying frenzy due to Cyber Monday. The stocks gained as much as 5.3%, providing the biggest boost to the NASDAQ. In addition to that, Nvidia rose 5.5%, Vodafone gained 6% while Tesla surged 6.2%.

New Zealand’s imports soared in October and reached the highest nominal value ever. A lot could be ascribed to higher crude prices as the New Zealand economy imports this commodity. Source: Bloomberg

In the other news:

• NZ’s trade deficit reached 1295 million NZD compared 850 million NZD expected, imports grew to 6.15 billion NZD from 5.89 billion NZD while exports increased to 4.86 billion NZD from 4.33 billion NZD

• A Brexit agreement, getting a green light from the EU during the weekend, will be put to the UK Parliament for a decisive vote on December 11

• Chinese industry companies’ profit rose 3.6% YoY in October, down from 4.1% YoY in the prior month

• Messaggero reports that the Italy’s budget deficit will almost certainly be 2.2%, it means a decrease compared to the initial proposal of 2.4% - it appears to be still too high for the EC to change its mind