Daily Commentary BY THE CURVE TEAM –

Both Sides Talk Up Trade Deal, Overshadowing Key Data

5th of April, 2019

Trade talk have dominated the airwaves over the past 24 hours, overshadowing the latest data. Meanwhile the opposition delivered its tax rebuttal last night.

There has been a steady wave of headlines over the past 24 hours suggesting that an agreement on trade is near. Both sides of the negotiations are suggesting the bulk of the details are agreed on with only the finishing touches to be worked through. We could see an announcement within a month.

Despite the persistent trickling of soundbites on the progress of negotiations, markets have taken little notice. After pessimism seems to peak about a week ago, they may well be waiting for tonights nonfarm payrolls report before marching on or resuming their slow melt lower.

The headlines overnight overshadowed more worrying data out of Europe. The economic block’s main engine of growth continues to either be collateral damage from the trade war or the canary in the coal mine as a bell weather for the pull back in aggregate demand on a global level.

Germany is factory orders continue to slide at an accelerating pace. Factory orders slumped 4.2% in February, adding to the 2.1% decline in January and are now down 8.4% from a year ago. Being a value add economy, which imports intermediate good, largely from China, and produces finished products such as many of the worlds high end motor vehicles, it is something to keep an eye on when it comes to the global outlook.

Meanwhile closer to home, the opposition delivered its budget rebuttal last night. The have pushed on with their tax plan as previously announced which gave them more ammunition to trump the current government’s tax cuts while still appearing fiscally responsible. It will now be up to the people to decide with an election expected to be called very soon.

David Flanagan

Director - Interest Rate Markets