Markets have stabilized but remain worried about quite a few issues going on in the world. Here is a quick update on the five things on investors’ minds and the signs of relief that could lift the gloom, the mood, and stocks.
Trade talks
China and the US are working to get a trade deal done by early March, the US deadline to conclude a deal before new tariffs are imposed.
In the meantime, USTR Robert Lighthizer and Treasury Secretary Steven Mnuchin travel to Beijing in an attempt to find a breakthrough. China has shown willingness to buy US products but is not keen on structural changes, such as regarding Intellectual Property (IP).
A meeting between Presidents Trump and Xi would lift the mood.
Chinese slowdown
The world’s second-largest economy grew by only 6.6% in 2018, the slowest in 28 years. The trade war with the US is probably the latest contributor to the downturn resulting from an overhang after years of stimulus and debt-fueled growth.
The government took baby steps to add more stimulus, but a major plan has not been enacted. A significant plan could provide relief.
German slowdown
The locomotive of the euro-zone probably escaped a recession in late 2018, but this is still unclear. Lower Chinese demand, new emissions regulations, slowdowns in neighboring countries and fear of worsening trade relations all took their toll.
Relief could come in the form official GDP figures that will confirm no recession, from the German government loosening its strict budget policies, or from a trade deal on cars with the US.
Brexit
Around six weeks to Brexit Day and the situation is clear as mud. A hard, no-deal Brexit remains the default option and the default gets closer to reality with every day that passes by. It seems that UK PM Theresa May is trying to run down the clock to force the hard-Brexiteers and the EU to get closer.
Relief could come from an extension of Article 50 beyond March 29th, a decision to go for a soft Brexit, adopting the Norwegian model, or the remote option of a second referendum.
Shutdown
The US government will shut down on February 15th unless policymakers strike a deal. And here, there is quite a bit of hope. Senate Democrats and Republicans reached a deal on funding for a border barrier and the opening of the government. President Trump has not given his nod just yet, bt has not ruled it out.
Relief could come from an official endorsement from the President.
Stay up to date with all the critical events for markets in the Forex Weekly Forecast.
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