Market Watch I Kristal Weekly Feed I 26th August 2019
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Kristal Weekly Feed | 26th August 2019

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All you need to know, in under 1 minute.

Here’s a concise report on what made headlines in the global market last week.

Positives

  • Taiwan reaps profits from the ensuing U.S.-China trade war
  •  U.S-Japan trade deal finalised; barriers on the export of American meat products lifted

Negatives

  • Trump raises tariffs on China, causes Dow to drop 600 points
  • Harvard economist says Hong Kong protests could potentially trigger a recession

Now, for more detail.

Positives 

1. Taiwan reaps profits from the ensuing U.S.-China trade war

What You Should Know

Burgeoning demand for 5G smartphones and hike in American production orders has helped Taiwan beat even the most bullish economic forecasts. Market analysts had estimated a 0.6% contraction; however, in a report released on Friday, it was stated that factory output for the month of July had in fact grown by 3%.

What You Should Lookout For 

Capital goods were the biggest gainer here as Taiwanese companies moved their production lines away from China to their homeland. Manufacturers of electronics components and computer products were the biggest drivers of this growth, helping Taiwan find a top place in the list of Asian countries with the fastest growth in 2019.
As the fall season nears and demand for tech gadgets grows, the country’s economy is set to grow further with the forecast for August predicted at -2 to 1% growth. Time to invest in this emerging economy? The signs definitely do look positive!

Suggested Reading:

Taiwan Factories Reap Rewards of U.S.-China Trade War

2. U.S-Japan trade deal finalised; barriers on the export of American meat products lifted

What You Should Know

While America continues to fight its tugs-of-war with China, there is some good news coming in from another Asian trade partner – Japan. The two countries have finalised a framework for their trade agreement which will maintain a status quo for American tariffs on Japanese automobiles, while the latter reciprocates by lowering taxes on American beef and pork exports.

What You Should Lookout For 

The deal makes it even more certain that the leaders of the two nations may make important trade and economic announcements during the upcoming G7 summit. At this point, Japan is doing whatever it can to avoid angering the U.S. and incur both economic and diplomatic losses. America is an ally that Japan needs against South Korea, China, and South Korea. The Nikkei reports that a fully-inked deal may be on the horizon for the end of September.

Suggested Reading:

U.S., Japan Reach Agreement on Trade Deal Framework, Reports Say

 

Negatives

1. Trump raises tariffs on China, causes Dow to drop 600 points

What You Should Know

President Trump has a 70th-anniversary gift for the People’s Republic of China – and it’s a hike in the trade tariffs already imposed on the country. Trump tweeted on Friday that the existing 25% tax on about $250 billion worth of Chinese goods would be increased to 30% from October 1st onwards.

The 10% tariff imposed on the second tranche of $300 billion of Chinese goods will now be taxed at 15%, starting September 1st.

The Dow Jones immediately dropped by 600 points to close at 25,628.90. The S&P 500 plunged 2.6%, closing at 2,847.11 for the week. The NASDAQ Composite dropped 3%, closing at 7,751.77.

This is the fourth straight week in which all major indices have lost steam. The Dow’s decline for August now stands in excess of 4%.

What You Should Lookout For 

Trump’s impulsive hike was in response to the news that China will now impose 5-10% tariffs on U.S. imports worth $75 billion, starting September 1st. China’s move will adversely affect American agriculture and farm and ranch families.

In his tweets, the American premier called for American countries to ‘return home’ and look for alternatives to China. The truth of this, however, is that it will not be easy for American industries to just pull out of China and start producing somewhere else. There seems to be no end to this war as of now – the G7 meeting does not look rosy for both these countries – and even the Fed’s own Jerome Powell has made a statement to the effect that there is no ‘rulebook’ for navigating the current politico-economic scenario. He did, however, mention that the Fed will do whatever it can in terms of monetary policy to ensure the benefits of a strong jobs market and economic growth are not derailed due to these tensions.

Suggested Reading:

How the U.S.-China Trade War Got to This Point

2. Harvard economist says Hong Kong protests could potentially trigger a recession

What You Should Know

Protests against the proposed Hong Kong extradition bill are continuing for over 3 months now; and noted Harvard economist Carmen Reinhart has now warned that this could very well be the tipping point for a global recession or a bigger economic slowdown than the one we are facing right now.

The global economic and financial hub has seen its economy weaken due to the China-U.S. tensions, and the ongoing protests are now adding on even more pressure on the country’s growth.

What You Should Lookout For 

The U.S. Senate Majority Leader Mitch McConnell has already stated that any ‘erosion’ in Hong Kong’s autonomy will lead to a dissolution of the 1992 law granting special trading privileges to the country. Earlier, Fed President Eric Rosengren also stated that the Hong Kong protests were on his global worry list. In his own words, Hong Kong is “one of the great global cities so we do have to be concerned about how that all gets resolved.”

Suggested Reading:

Harvard Economist Warns Hong Kong Could Trigger World Recession