Daily Commentary BY THE CURVE TEAM –

Uncertainty Fuels Outlook Concerns

23rd of January, 2019

Uncertainty continues to plague both markets and the outlook.

Markets in the US re-opened overnight after the long weekend for Martin Luther King day and were on the back foot from the get go. Equities were under pressure and both bonds and the USD were bid as concerns over the outlook continue to grow.

The brief increase in positivity around the trade talks between the US and China has quickly evaporated. Numerous officials in the US tied to the talks quoted overnight suggest things aren’t going as smoothly as first thought.

It seems the US is learning from past mistakes and wants to ensure compliance with any deal struck. While the Chinese olive branch of a sizeable increase in US imports over the coming years is positive, the US wants to be able to ensure that anything that is agreed upon in the trade deal can be double checked that is is actually happening.

This is something that China is unlikely to agree to.

It is also becoming clear that little progress is being made on the deeper issued between the US that stretch beyond the simple trade surplus. Issued such as forced transfers of Intellectual Property, foreign investment restrictions and government subsidies are still key sticking points.

When you add the ongoing government shutdown, the Brexit mess and growing jitters over global debt as quantitative tightening continues there is clear justification as to why the market is worried about the outlook.

David Flanagan

Director - Interest Rate Markets