Risk-off accelerated yesterday as news broke that Trump is expected to sign the Hong Kong bill despite China threatening it would negatively impact the trade negotiations. S&P 500 futures nosedived 0.8% on the news but has since recovered half of the retreat. But the negative sentiment spilled over into Asia and Europe in today’s session with South Korean equities down 1.3%. The usual trade talks yo-yo started shortly after the sell-off with China’s chief trade negotiator saying he was “cautiously optimistic” but also confused about the US position on the trade deal. The next big risk event for equities is the December 15 when the US will decide whether to additional tariffs on Chinese goods.
volatility surrounding the US-China trade talks the NYFed Q4 GDP Nowcast is plunging lower towards zero growth ending last
Friday at 0.4% growth down from 2% in late September. This is sharp decline in
expected economic activity and indicates that the Fed is behind the curve again
and that Fed Funds futures are not correctly pricing in the need for more
easing. Our view is that the Fed will be forced to ease further as economic
activity will continue to slow down as the US-China conflicts creates increasing
uncertainty for companies holding back on employment and investments.
warning shot this week has been South Korean equities down 3.1% for the week
showing that positive narrative in Asia remains fragile to trade talks headlines
and macro figures. Later today the US Conference
Board Leading Indicators for October will be released, and expectations are for
another decline m/m potentially taking the index in its first negative y/y
print since 2009. Depending on the next couple of weeks’ trade headlines
and macro the “Santa rally” could easily be derailed.
the first social media company to remove the option for advertisers to run political
ads on its platform. The decision added pressure on the two online advertising
giants Google and Facebook. The Trump campaign was using social media in a very
effective way during the 2016 election and has incentives to keep status quo. According
to Bloomberg, Trump campaign officials have pressured Facebook to maintain its
permissive political advertising rules. But
yesterday Google announced that it will can candidates from targeting election ads
based on people’s political affiliation although targeted messages can still be
directed based on gender, age and geography. So not as prohibitive as Twitter,
but still more constrained than Facebook. According to Facebook’s own
advertising revenue is expected to be 0.5% if revenue in 2020, but that
number excludes revenue from PAC (political action committee) ads. But the ball
is now surely on Facebook and further constraints on political advertising is
not good for the Trump campaign which heavily uses advertising on Facebook.
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