As Trump again says trade deal is close, analysts doubt a resolution before next year

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In an appearance on Fox TV Friday morning, President Trump said a trade deal with China is close, and while the statement helped markets rally, most observers remained skeptical, expecting trade tensions to continue into next year.

“The bottom line is we have a very good chance to make a deal,” he said.

“I don’t know how many iterations that we’ve now gone down the road of fool me once, shame on your and fool me twice, same on me, but it is many,” said Mark Hamrick, senior economic analyst, Washington bureau chief, Bankrate.com. “We know that forces within the White House have not always been aligned when it comes to messaging on trade. We also have learned that president speaks with a lack of precision to put it mildly. Investors and business leaders have come to understand that the U.S.-China trade problem is not going to be fully resolved any time soon, if ever. If there is an agreement, or when there is, it will most likely not address the wide range of issues which separate both sides. Investors would be wise not to make bold moves with their money based on words or Tweets which are not substantiated.”

Marty Mitchell of the Mitchell Market Report, agreed, “It's impossible to predict the next headline on trade because each one seems to contradict the last.”

Earlier, China President Xi said, "We want to work for a phase one agreement on the basis of mutual respect and equality,” news agencies reported.

“Xi’s comments did not reveal anything new, but served as a reminder that China is also in need of a trade deal,” said Edward Moya, senior market analyst, New York at OANDA.

“I find the timing of his remarks interesting, just after the U.S. Congress passed legislation in support of the pro-democracy movement in Hong Kong," Mitchell commented. “This tells me that Xi may be willing to keep the two issues separate. He's probably also trying to get out in front of the next round of U.S. tariffs set to go into effect on Dec 15. Markets didn't react all that much.”

In a 2020 Fixed Income Outlook, PineBridge Investments Global Head of Credit and Fixed Income Steven Oh, wrote that escalating trade tensions remain “the most significant headwind to the global economy.” He added, “While both the worst case scenarios for U.S.-China trade and Brexit appears to be tempered for the time being, political risks will linger in 2020 and have the potential to quickly shift investor sentiment. This uncertainty will dampen capital investment.”

Recession is not in PineBridge’s forecast, although it expects “lower growth and lower returns.” Oh said, “we expect 2020 to be marked by a continuation of bifurcated risk appetites, in which many investors steer clear of the highest risk segments within assets, mainly due to concerns about deteriorating credit quality amidst a late cycle environment.”

Consumer sentiment
The University of Michigan’s final November consumer sentiment index climbed to 96.8 from 95.5 in October, while the current conditions index declined to 111.6 from 113.2 and the expectations index rose to 87.3 from 84.2.

Manufacturing
Manufacturing activity in the Kansas City region “continued to decline modestly in November, however expectations for future activity rebounded moderately,” said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

The composite index of the bank’s manufacturing survey held at negative 3 in November, as “deterioration in durable goods production” continued. The number of firms planning to add workers in the next year was considerably higher than those expecting to reduce the workforce, according to the survey.

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Trade agreements Tariffs Economic indicators Consumer sentiment index Manufacturing industry Federal Reserve Bank of Kansas City
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