9 to 15 December: Thank you, next

The US and China have reached an agreement on a Phase One deal in which the US refrains from raising tariffs in December (scheduled for the 15th), whilst halving the 15% tariffs on goods worth of about USD 125bn. China also committed itself to buying more agricultural products from the US (about USD 40bn annually), which is a considerable increase over the usual USD 20-25bn range. If everything goes according to schedule, we believe that the final version of the Phase One deal can be signed as early as January or February, when Phase Two can commence (which might overarch subsidies, cyber-intrusions, data storage and the remaining tariffs). Whilst the deal could bring some certainty, encourage business confidence and strengthen investor sentiment, underlying global growth is unlikely to benefit from the agreement before 2Q20. Although the tone between the US administration and the Chinese government has become more constructive recently, we suspect that the new rounds of negotiations could be noisy and the tone of the parties will be volatile – similarly to what markets experienced throughout 2019. Looking forward, we expect the negotiations between the US and China to remain one of the key themes in 2020 as well as the Presidential elections in the US and the Brexit talks between the UK and the EU. In addition, we will get an answer in 2020 to the billion-euro question whether the German government is willing to start spending in order to aid the ailing German economy.

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