This Morning’s Log Entry: China, The Fed, Apple, Vietnam

7/31/19 Wednesday

The first tweet I saw early this morning was from Zero Hedge stating that trade talks in China had collapsed after just a day and a half. Within minutes I knew that that wasn’t the case, because I could see in futures trading that the market didn’t collapse. I then jumped over to this morning’s updates from the South China Post which confirmed half of the only legitimate expectations for this round of talks; that China would pick up the purchase of U.S. farm goods, although only under “favorable terms”. Interestingly, there was nothing definitive with regard to the U.S. lightening up on Huawei (the other half of legitimate expectations). Talks are set to resume in September.

Based on the above, if a Trump tweet is to follow today, I’m guessing it’ll hail a victory for U.S. farmers, but we’ll see…

Now it’s all about the Fed. The latest data confirm that the global economy rests in a somewhat precarious state (mixed hard data amid relatively somber sentiment), while the U.S. by itself is basically hanging in there; mixed (to negative) data from the manufacturing space, while the consumer is feeling uber-confident (read record stock prices), and the jobs picture still looks a-okay. Not a lot in the data to justify a big move by the Fed; they’ll announce the latest on interest rate policy today.

With regard to the Fed, a quarter-point is baked into stock prices, and that’s what we’ll get. What’s also baked in, however, is a commitment that there’s more to come. That one’s a bit less-certain.

Apple is certainly helping the market this morning, as – despite a 12% hit to iPhone sales – the overall numbers were good, it sits on literally a country’s worth of cash, and Tim Cook remains giddy over what’s to come. Man!, that (Cook’s giddiness) is gutsy given the present state of geopolitical affairs!

Speaking of the latter, beyond this huge week for markets (trade talks, Fed, earnings, jobs number), traders will begin intensely focusing on the general state of global trade. And, frankly, the trend there is anything but encouraging. For example:

“Vietnam is almost the single worst — that’s much smaller than China, much — but it’s almost the single worst abuser of everybody.”  President Trump

“Lighthizer Says Vietnam Must Cut Its Trade Surplus With U.S.”  Bloomberg headline

Imagine you’re a manufacturer who just went to the expense of uprooting from China and settling in Vietnam!


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