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THE DAILY MACRO BRIEF: China/USA and Mexico/USA agreements, Draghi's concerns, Brexit…

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06/12/2019 | 07:54am EDT

Trump says the trade agreement will only be signed if China adheres to the conditions set at the beginning of this year. The agreement between Mexico and the United States is, in fact, not yet effective. Mario Draghi warns of Europe's vulnerability to trade conflict.

No negotiations possible. Trump said yesterday that the trade agreement already discussed with China will not be renegotiated. It will be this agreement and not another. The spokesman for the Chinese Foreign Minister made sure to point out that "Beijing will fight to the end" in the event that Washington intensifies the trade war. In this "toxic atmosphere" (Western diplomat), preparations for the Xi / Trump meeting on the margins of the G20 in Japan are kept to a minimum and China has still not confirmed that this meeting will be held.

The small asterisk at the bottom of the page. While Washington and Mexico City welcomed their agreement, Trump criticized the New York Times for downplaying its magnitude by saying that the measures taken by both sides had already been decided in previous discussions. The President got annoyed "I don't know where the Times got its story from". In an attempt to justify himself, he brandished a page of the document that was supposed to remain secret, which journalists hastened to photograph. Results? It is now known that the United States will review "45 calendar days after the signing of the agreement" on Mexico's progress in curbing the flow of illegal immigrants on the southern border.

Focus on international trade. In a speech this morning, Mario Draghi did not talk about the monetary policy of the euro zone, but focused on the effects of trade tensions. He expressed his concern about the exposure of Central European countries to trade warfare. Indeed, their openness to international trade and their specialization in certain industries make them vulnerable in the event of shocks or increases in customs duties. He cited as an example the countries where 30% of manufactured exports depend on the automotive industry, especially since some goods cross borders several times during the production process.

In other news. Inflation in China rose from 2.5% in April (on an annual basis) to 2.7% in May. The Bank of Finland has lowered its growth forecasts for the next three years to 1.6% this year, 1.5% in 2020 and 1.3% in 2021. Yesterday, the Banque de France confirmed its growth forecast of 0.3% for the second quarter of 2019. The Brexit agreement negotiated with Theresa May will not be revisited with the next British Prime Minister, a European Commission spokesman confirmed. The Italian government will do its utmost to avoid the opening of an infringement procedure for excessive debt and the fine of 3.5 billion euros (0.2% of its GDP) promised Giuseppe Conte, the Italian President of the Council.

Romain Fournier
© MarketScreener.com 2019
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