The stock markets enjoyed a fine day yesterday, initially following reports that China was set to drop its tariffs on American cars from 40% to 15%. However, there was more good news, when the Wall Street Journal reported that Chinese officials are rewriting their economic plans. It appears that Beijing is preparing to draft a replacement to the ‘Made in China 2025’ policy.
If so, it would give foreign companies greater access to China, which was one of Trump’s key demands in the trade negotiations. There is some way to go, but the news will likely please Trump, who would probably claim victory in the trade talks and possibly resist imposing further tariffs on Chinese imports. Still, it is important not to get too carried away until everything is confirmed, although try telling that to investors: the Dow Jones industrial average rose throughout the day.
Inflation came in as expected at 2.2% in November from 2.5% the previous month to post the lowest reading since February. The slowdown gives the Federal Reserve another reason not to hike rates, although it still looks likely rates will rise in December. The real question is what it means for policy in 2019 and it will be interesting to see what Jerome Powell has to say next Wednesday when the Fed hosts its next press conference.
Trump’s former lawyer was sentenced to three years in prison yesterday for hush money payments and lying to Congress. What this might mean for the president in the future is currently unknown, but it could well unsettle him. It is the longest sentence so far in the Mueller probe. He had been ordered to surrender on 6 March 2019, which will give him a few more months of freedom.
It is a fairly quiet day in the US, but we will see initial jobless claims up to 8 December 2018. The figure is expected to drop to 225,000 from 231,000 the previous week. The job market in the US has been very strong for a long time now, although there have been a few signs that the economic recovery is peaking. It will be interesting to see what the figures come in at this time.
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