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Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.
Good Day Sunshine
The unofficial mantra of the 2019 economy: Uncertainty is holding back growth. Well…
Trade tensions ease: President Trump agreed to a limited trade deal with Beijing that will roll back existing tariff rates on Chinese goods and cancel new levies set to take effect Sunday. Nafta 2.0 is on track for Congressional approval next year.
Brexit clarity: British Prime Minister Boris Johnson won a decisive majority in Thursday’s general election. The scale of the victory makes it all but certain Britain will leave the European Union at the end of next month.
Government stays open: Top Democratic and Republican lawmakers said they reached a tentative agreement on federal government spending, likely averting an end-of-year shutdown.
Lower for longer: The Federal Reserve said it isn’t planning to raise rates any time soon. In the meantime, officials are greasing money markets with as much as $150 billion in liquidity.
It’s not all economic rainbows and unicorns, of course. China on Friday indicated the trade deal is yet to be completed, Mr. Trump could intensify commercial spats with Europe or other allies, Brexit still involves years of complex trade negotiations, political leaders in Scotland will now push for a second independence referendum, globalization has stalled, global growth is slow, political tensions remain high and it seems like there’s always something lurking around the corner.
WHAT TO WATCH TODAY
U.S. retail sales for November are expected to rise 0.5% from a month earlier. (8:30 a.m. ET)
U.S. import prices for November are expected to rise 0.2% from a month earlier. (8:30 a.m. ET)
U.S. business inventories for October are expected to rise 0.2% from a month earlier. (10 a.m. ET)
The New York Fed’s John Williams speaks at the Borough of Manhattan Community College at 11 a.m. ET.
The Baker Hughes rig count is out at 1 p.m. ET.
TOP STORIES
Here Comes the Rain Again
China indicated that a near-term trade agreement with the U.S. has yet to be completed. None of China’s state-owned media outlets or economic agencies involved in the trade negotiations made any public statement on Friday about the deal endorsed by President Trump. At a regular news briefing, Foreign Ministry spokeswoman Hua Chunying referred only to how news of the agreement helped fuel a surge in U.S. and European stocks. Pointedly, Ms. Hua didn’t confirm the existence of a deal. Instead, she hewed to the line that Beijing has maintained throughout the nearly two-year trade battle: “Any agreement must be mutually beneficial,” Lingling Wei reports.
Takeaway: The muted reaction from Beijing underscores uncertainty over whether the two sides can get to the finish line and produce a deal capable of withstanding intense political blowback both in Washington and Beijing.
So what’s in the so-called agreement? The U.S. would roll back existing tariffs and hold off on any new levies. China would buy $50 billion worth of agricultural products in 2020, along with energy and other goods, improve intellectual property protection, open its financial services market and agree to prevent currency manipulation. Should Beijing fail to make the purchases it has agreed to, original tariff rates would be reimposed, said Michael Pillsbury, an adviser to the president. In a “goodwill gesture,” the U.S. plans to announce some tariff rate cuts today. Mr. Trump has stressed that a so-called phase one deal is expected to lead to a phase two deal that would tackle more difficult problems, including forced-technology transfer, subsidies, and the behavior of Chinese state-owned firms, Lingling Wei, Bob Davis, William Mauldin and Josh Zumbrun report.
A trade deal could help China’s slowing economy. The country’s leaders Thursday approved an economic blueprint that promises more fiscal and monetary measures with the aim of supporting everything from consumption to infrastructure investment and employment in the coming year—all to ensure that the growth rate will be kept stable. The plan is aimed at countering a protracted domestic slowdown that has seen the economy decelerate to its weakest pace in decades, Chao Deng reports.
Turning Point
The European Central Bank joined the Federal Reserve in pausing a global wave of monetary easing. Central banks around the world have started signaling a possible economic turning point after moving aggressively this year to support global growth that is headed for its weakest year since the financial crisis. Christine Lagarde, the ECB’s new president, told reporters she detected “some initial signs of stabilization” in eurozone growth, and “somewhat less pronounced” risks to the economy. The export-oriented region has been particularly impacted by tensions surrounding international trade and a slowdown in China, Tom Fairless reports.
Sentimental Journey
Sentiment among Japan’s large manufacturers deteriorated to the weakest level in nearly seven years. The Bank of Japan’s tankan index was the lowest since March 2013 and marked a fourth straight quarter of worsening. In addition to concerns over the U.S.-China trade conflict, domestic factors, including the impact of the sales tax increase in October to 10% from 8% and effects of a powerful typhoon that hit Japan in October, had likely affected corporate sentiment, Megumi Fujikawa reports.
WHAT ELSE WE’RE READING
The IRS in 2016 and 2017 sent letters to 3.9 million Americans alerting them to a tax penalty for not having health insurance. “Our results provide evidence that the intervention increased the likelihood of taxpayers obtaining coverage, and that this additional coverage reduced middle-age mortality…. In the two years following the intervention, the rate of mortality among previously uninsured 45-64 year-olds was lower in the treatment group than in the control by approximately 0.06 percentage points, or one fewer death for every 1,648 individuals in this population who were sent a letter,” Stanford’s Jacob Goldin and the Treasury Department’s Ithai Lurie and Janet McCubbin write in a National Bureau of Economic Research working paper.
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