In the context of the ongoing U.S.-China trade talks one could say that they have gotten a hint of “Brexit” about them and that they seem to be dragging on and on with lots of misunderstandings on both sides.
The Financial Times reported about an exclusive interview they had with the U.S. agriculture secretary, Sonny Perdue who said that Chinese “attitudes” towards striking a trade deal with the U.S. have hardened, in the latest sign that negotiations to resolve the conflict hanging over the global economy have hit a rough patch.
The U.S. agriculture secretary, Perdue, said he hoped that Beijing would agree to “significant increases” in purchases of American farm products in a deal, but suggested that China’s willingness to make the final concessions on a number of issues was unclear.
The two sides have been wrangling over the substance of the agreement, including the scope of Chinese concessions on issues such as industrial subsidies, treatment of intellectual property and foreign investors. They have also been trying to ensure that Beijing will live up to its commitments.
During the interview, the U.S. agricultural secretary Sonny Perdue made some interesting comments that are, at least in my view, helpful and certainly “food for thought” for investors when he said: “It’s not moving as quickly as we believe it should. I almost think it’s a trade negotiation strategy: they get you hopeful and optimistic and then it’s definitely two steps forward, one step backward; [and] one step forward, two steps backward.”
The dollar index DXY continuous for now its slow upward move and quotes at around 96.70, which is somewhat stronger than yesterday’s close at 96.4950.
The futures of U.S. equities are for the moment overwhelmingly in the red with losses in the 0.50 to 0.85 percent range.
Overnight, equity markets in Japan also ended in the red after the Nikkei Flash Japan Manufacturing PMI showed that Japan’s manufacturing output fell at fastest pace in almost three years amid sluggish demand.
In the meantime, in the interminably tedious EU-UK divorce process, the European Union agreed yesterday to a two-week delay to the UK’s exit with “no” conditions, and with a further extension if the UK Parliament agrees to the withdrawal agreement.
Investors should take care not to let them be fooled by this.
It might seem like a deadline, but the EU-UK divorce is called interminably tedious for a reason. It is interminable. It’s also very tedious.
The chances of the government’s withdrawal agreement being agreed to by the UK Parliament still look very low.
That would then set the stage for a lengthy exit process and if the delay is two years, it may just be simply to withdraw Article 50 and resubmit it.
That may well include an election in the UK and it would also have to include the UK’s participation in the European Parliamentary elections that will take place from May 23 to May 26.
Especially the British media have become excited about the fact that a UK “online parliamentary petition” to reverse the divorce that runs under the title “Revoke Article 50 and remain in the EU” has in the meantime reached over three million signatures at the moment of this writing.
By the way, the UK Parliament's petitions committee tweeted that the rate of signatures was "the highest the site has ever had to deal with", after the website had crashed, the BBC informed.
In reality, all this shows the divided nature of the country. Support for the petition has been concentrated in a few big cities, but other big parts of the country, including most of Scotland and Northern Ireland have remained quite apathetic.
Northern Ireland, is spite that next week’s voting remains as scheduled, has the least support for revoking the EU-UK divorce.
Anyway and referring to a speech Winston Churchill, who was UK Prime Minister from 1940 to 1945, and that he gave in 1942 we could say “This is not the end. It is not the beginning of the end, and unless next week’s vote in the UK Parliament goes in favor of Prime Minister Theresa May’s government, it is not even the end of the beginning.”
The British pound remains for the moment little changed around the $1.31 - $1.3150 zone. Investors seem to prefer taking a wait and see attitude, and for good reason. No doubt, there are turbulent times for the British pound as well as for British equities on their way, but we aren’t there yet.
Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.