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ICBC Financial Market Daily Review - November 28, 2018
 

International News
1. St. Louis Fed President James Bullard said in an interview that the last two years have been “roses” for the U.S. and world economies. The easy part may have ended. The “cracks” in the U.S. recovery begin to shape the Fed’s internal debate over where the Fed stands in a rate-rise cycle and how much further it should go. The Fed may face a year of difficult decisions, with rates still low by historic standards but growth ebbing.
2. The WirtschaftsWoche reports that U.S. President Donald Trump may impose tariffs on imported cars as early as next week. “The investigation report of the Ministry of Commerce is on the table of the President,” reported WirtschaftsWoche, citing EU sources: “Trump will probably decide the tariffs next week after the G20 meeting.” The report recommends 25% duty on car imports from all countries except Canada and Mexico.
3. U.S President Donald Trump threatened to cut subsidies for General Motors (GM) after the GM said it would close five plants in America and lay off 15,000 workers. “The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all GM subsidies, including…for electric cars.” Trump said in tweets.
4. The European Union on Monday published proposals for reform of dispute settlement at the World Trade Organization (WTO), saying that it has agreed with China, India and other countries. It is hoping to overcome U.S. objections that have thrown the WTO into crisis. “Now, together with a broad coalition of WTO members, we are presenting our most concrete proposals yet for WTO reform. I hope that this will contribute to breaking the current deadlock,” European Trade Commissioner, Cecilia Malmstrom, said in a statement. The proposals will be presented at the WTO’s General Council on December 12. The General Council has the right to incorporate these recommendations into the amendments to the WTO dispute settlement.
5. U.S. President Trump suggested on Monday the Brexit deal would make it more difficult for UK-US trade, but the British Prime Minister’s Office refuted it. Speaking to reporters outside the White House, Trump said that the deal “Sounds like a great deal for the EU,” adding, “I think we have to take a look at seriously whether or not the U.K. is allowed to trade.” “Because, you know, right now if you look at the deal, they may not be able to trade with us and that wouldn’t be a good thing. He added: “I don’t think they meant that.” Trump’s statement dragged down the pound on Tuesday. A spokesperson for the Teresa May office said that the deal between the UK and the EU allows the UK to sign trade agreements with the rest of the world, including the United States.

Domestic News
6. As indicated by the National Economic Council Director of the White House Larry Kudlow, the U.S. President Trump stayed open about reaching an agreement over trade conflicts between America and China at his dinner with the Chinese President Xi Jinping Saturday evening. But if no breakthrough was made, he was ready to impose more tariffs on the products exported from China to the U.S. So far, it is unclear whether the two sides have reached consensus on the formal agenda for their meeting. According to Kudlow, neither of the two sides’ advisers was arranged to hold talks at the meeting. He was quoted as saying, “the president believes ‘there is a good possibility that we can make a deal’ and he ‘is open to it’, but this is conditional on some premises.”
7. As noted by the Chinese Ambassador to the U.S. Cui Tiankai, he didn't believe Beijing was seriously considering using its massive U.S. Treasury debt holdings as a trade war weapon. In his exclusive interview to Reuters, Cui said that China wouldn’t intend to cause any financial instability to the global market, because “this is very dangerous, this is like playing with fire.” He also noted that China would attend this week’s G-20 summit for a deal to ease a damaging trade war with the U.S., while warning of dire consequences if U.S. hardliners try to separate the world’s two largest economies.
8. The People’s Bank of China (central bank of China), China Banking and Insurance Regulatory Commission (CBIRC) and China Securities Regulatory Commission (CSRC) jointly released the Guiding Opinions on Improving the Regulation for Global Systemically Important Financial Institutions. According to the document, G-SIFIs shall be put under stricter regulation by two means: introducing special regulatory requirements and establishing special handling mechanisms, so as to guard against systematic risks.
9. Influenced by such factors as the slowing price hike and the high base, the profit growth rate of Chinese industrial enterprises in October hit a new low since the past seven months. However, thanks to the dropping operational cost and asset-liability ratio, these enterprises saw their profit margin going up somewhat. In the first ten months of the year, the new profits reaped by these companies mainly came from such sectors as steelmaking and petroleum. Analysts believe that Chinese companies may face continuous pressure form profitability, since the PPI growth rate is expected to continue dropping.
10. In the face of the growing pressure from economic growth slowdown, the situation is becoming more difficult; more risks and hidden dangers are gathering and exposed, which may trigger a financial crisis; and the debt default will become more startling in China in the next year, believes He Qian, Deputy Director of the Financial and Economic Affairs Committee of the 11th National People’s Congress.


(2018-11-28)
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