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    USA, China and Huawei. Another turbulent week

    2019-05-28

    Trade war with China is gaining new momentum. Huawei prohibition of use American technology and components; the possibility of using such measures against Hikvision, the world's largest video surveillance systems; just a month, Remaining possible introduction of tariffs on the rest $300 billion of Chinese imports; Xi's call to give up further problems and more likely to remember the "heroic past and recent wins, won by the Chinese people under the leadership of the Communist Party ", and most importantly - the lack of a plan even further negotiations, Trump announced in addition to meeting and G20 summit at Sea, Japan, 28-29 June, merely indicates, rapidly end the trade war not see. This means, that investment strategies should be adapted to the new reality.

    Of course, trade war threatens US economy. The data, which was published last week, namely falling sales of new homes, in April, on 6.9%, and reduce the May PMI to 50.6 (lower 50 - slow; higher growth -), with 52.6 in April, show a gradual slowdown. At the same time, applications for unemployment fell by 1,000, to 211 000, indicating that a strong labor market. And according to the Fed, exactly he, with positive consumer sentiment and the delayed effect of the tax reform Trump, will help balance the negative effects of the confrontation between the US and China.

    This week, the Fed published the minutes of the last meeting, dedicated areas of monetary policy. They demonstrated, the regulator plans to carry out "moderate" policy and make some steps towards raising or lowering rates only if, If the US economy will show either a significant jump in inflation or a significant slowdown in economic growth. According to recent macroeconomic data, neither one, or else a significant threat, therefore hardly expect any drastic action from the Fed, at least, in the short term.

    The uncertainty, caused by trade wars, led investors to seek refuge in Treasuries, US government bonds. Raising rates will inevitably affect the profitability and, Consequently, decrease in stock prices. According to Barclays, if tariffs will be imposed on the amount of Chinese imports, this will 10% US stock market correction. All week bond prices rose, in accordance, to reduce the profitability of a decade 2.32%, Thursday night, which is the lowest value, since the end of 2017.

    On the other hand, low yield Treasuries may well make investors again seek his fortune in the stock market. After dividend yield, who pay a lot of big companies, much higher than the current bond yields.

    Corporate results season almost over. This week a team raportuvala retailers, for which the question tariff increase is paramount. I must say, that companies, targeted at retail customers, begin to worry:

    Best Buy: "The impact of tariffs will lead to higher prices, US consumers suffer ".

    Home Depot: "If current rates remain in force, it will increase our costs further $1 one billion, in addition to the billion, which was the result of tariff increases in 2018 ".

    Kohl’s Corp: "The tariffs will affect goods of Chinese origin, which have about 20% ".

    Walmart: "Raising rates will hit the American consumer".

    Macy’s: "The increase of 10% to 25% for us to have a negative impact, but we cope with this ".

    Ralph Lauren: "Now we feel only a small negative impact of tariff increases, but our team is ready for different scenarios and trying to accelerate the diversification of the supply chain ".

    Del Monte Foods: "Consumers will have to pay more for basic goods".

    There is no doubt, that such sentiments can quickly transform into a negative trend in the stock market and lead to higher volatility. So, like, are waiting for us interesting times.

    According to the authors John COMPANIES (financier, founder of the First Kyiv Investment Club) may not coincide with his own opinion.

     

    “HB Business “

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