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Concerns Over U.S.-China Trade Deal

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This week in pre-market economic data is rich — but not until the latter half: tomorrow’s private-sector payroll totals for November from Automatic Data Processing ADP, and Friday’s non-farm payrolls from the U.S. Bureau of Labor Statistics (BLS), including a fresh Unemployment Rate, among them. Currently, estimates for the BLS number are 189K — considerably higher than what we saw in October.

Trump Puts Trade Deal Timeline in Doubt

This morning, however, pre-market futures are down notably, as President Trump’s comments on a forthcoming trade deal with China have pricked the balloon of hopefulness. The president, who is currently in London for today’s NATO summit, suggested a trade deal might have to wait until after the 2020 election, and that there was no deadline for an agreement with Beijing.

Whether he meant just the “phase one” proposal first launched in the media two months ago or the entire trade agreement is uncertain; no doubt reporters will be seeking details as the day goes on. Either way, what followed was classic risk-aversion reactions in the marketplace: a falling U.S. dollar and Chinese yuan, with a Japanese yen and Swiss franc rally corresponding. Also, the Dow is currently down 280 points from Monday’s close.

Further, Trump also discussed putting up to 100% tariffs on imports coming from France, including champagne, cheeses and other fine goods. Ahead of holiday season, especially New Year’s Eve, this may result in an unexpected snag to this year’s holiday season. In total, $2.4 billion in French imports may be hit with new tariffs. This is apparently in response to French taxes levied on U.S. digital services such as Google GOOGL.

Yesterday, Manufacturing data was mixed — November Markit PMI beat expectations by 40 basis points to a level of 52.6 (anything above 50 connotes expansion), while ISM Manufacturing for November slid to 48.1%. This was below the 49.2% expected and the previous month’s 48.3%. Construction Spending for October was even worse, swinging to a negative 0.8% from +0.4% expected and +0.5% reported in September.

Tallies for Black Friday and Cyber Monday are in, at least partially: 25 million items were ordered between those two days. Amazon AMZN declared it the greatest Cyber Monday in (its relatively short) history; Best Buy BBY looks to have also performed well over the past weekend. Obviously, this is a crucial time for any retailer, and those with a strong online presence appear to have taken advantage.

Stock markets had run up nicely through the first 11 months of the year, but fresh concerns about the condition of a U.S.-China trade deal are taking headlines at this hour. Perhaps putting a fine point on what expectations are from the Trump administration might be able to lower this wall of worry a bit.

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