The China-US trade war comes back into focus this week with talks due to resume between both countries.
After Friday’s bounce off the back of OK jobs data for September (136,000 new jobs and a 50 year low for the jobless rate of 3.5%) talk of a US recession has eased, but the role played by the trade dispute on the sharp slowdown in US manufacturing is sure to return to the fore very quickly.
The jobs report was weak and showed losses increasing in some key sectors.
Hence the need (in the eyes of US market analysts) for good news on the trade talks to provide a circuit breaker to the underlying fears about a US slowdown.
The talks are due to be held on October 10 and 11 and it remains to be seen just how serious the US will be with Donald Trump under increasing pressure from the impeachment inquiry.
His credibility came into even sharper focus with his absurd appeal to China last week to investigate the affairs of the Biden family in China (former Vice president Joe Biden is a Democratic Party candidate for the 2020 presidential poll).
The AMP’s chief economist, Dr. Shane Oliver wrote last week that “Both sides have offered a few goodwill concessions going into these talks notably with China not retaliating to the latest US tariff hikes and the US delaying some tariff increases, but constant threats from the US side have not helped.”
“A full resolution of the dispute may be wishful thinking at this point, but the pressure on both the US and China is now intense with the trade war dragging on both economies and the US economy at increasing risk of recession which would be disastrous for President Trump’s re-election prospects.
“As such, there is a reasonable chance of some sort of interim deal that involves China making some commitments around IP, knowledge transfer and the purchase of US agricultural products and the US freezing tariffs at current levels.
“If so, this would take some pressure of the global economy and would come as a relief to investors, but is unlikely to see big rebound as the uncertainty will remain,” Dr. Oliver wrote at the weekend.
On the US data front, the minutes from the Fed’s last meeting (Wednesday)will be examined to see how far the US central bank has left the door open for more easing.
Consumer price inflation data for September is out on Thursday and a reading around 2.4% year on year is expected, compared to the core reading favoured by the Fed around 1.8%.
Data on hiring and job openings will also be released Wednesday
In Australia a quiet week with the September NAB business survey later today expected to show business conditions and confidence around average levels, consumer confidence (Wednesday) also around average and August housing finance commitments to show a 3% rise.
