Alquity global market update: 26 November to 2 December

26 November to 2 December: Truce between Trump and Xi: ‘We happy, Vincent?’

Although the year-end is quickly approaching, politics and policymakers are keeping financial markets and investors on their toes. US President Trump and Chinese President Xi met in Argentina. Depending on which media outlet you may read, the takeaway from the G20 meeting may differ significantly. Here is our take. The facts are the following:

the US and China have finally agreed to engage to reform the World Trade Organization (WTO),
the countries will initiate negotiations on intellectual property and cyber security,
the US may refrain from further imposition of tariffs (at least temporarily),
China agreed to buy more products from the US.

Is this progress meaningful? Not too meaningful from a macroeconomic point of view, but from the aspect of international politics and global market sentiment, such progress is meaningful enough. Our takeaway is that this outcome will not smooth out volatility in markets, but should be just enough to floor further downside risks to asset prices, especially within the emerging universe. To summarise, we quote Pulp Fiction: ‘We happy, Vincent? Yeah, we happy!’

This is the last week this year when the US presents its monthly jobs report. Markets will focus on nominal wage growth, as it is broadly acknowledged by investors by now that labour market tightness has already reached its cyclical peak in terms of the level of employment and rate of unemployment. In addition, various voting and non-voting Fed members will deliver speeches, highlighting their monetary policy outlook. Compared to the US, Europe and Japan will not provide too much excitement in terms of data releases.

Within the emerging universe, Asian economies will start the week by publishing PMI figures from November, including the Caixin manufacturing PMI from China. Furthermore, the central bank of India will have its last monetary policy decision in 2018, and later, China publishes a barrage of economic indicators. In Latin America, the Chilean central bank may keep the policy rate stable at 2.75% and provide guidance on the trajectory of interest rates going forward. In addition, a wide variety of tier-one monthly economic indicators will be published by Mexico, Colombia and Brazil. In Africa, Q3 GDP data are published by South Africa, Kenya and Morocco.