MacroResearchBoard

Global Trade: At A Turning Point? – November 25, 2019

Hopes for a U.S./China trade deal have waxed and waned for more than a year. Expectations have been scaled back to the point where only a small “Phase I” agreement is now anticipated, and even then a deal is proving elusive.

MRB has noted that the tentative signs of stability in global manufacturing activity were encouraging, but further follow-through was critical in order to sustain the uptrend in equity prices. To this end, one positive development has gone below most investors’ radars, namely a recovery in China – the global manufacturing hub – including flickers of life in China’s export data.

Chinese exports to the U.S. have plunged, and a trade truce between the two countries is critical to lift this drag from global trade. The next few weeks of negotiations will be important in determining whether the uptrend in equity prices and bond yields will persist, or falter. Meanwhile, keep a close eye on both PMI surveys and trade trends.