"Don't push too far your dreams are China in your hand" T'Pau

Global leaders are setting off for the G20 meeting in Japan this weekend, with what feels like more at stake than usual in terms of the global economy. Premier Xi has prepared, according to the Wall Street Journal, a list of terms to find a resolution to the trade dispute. One of the trickier demands is to lift the ban on Huawei. The weakness in manufacturing data across the globe has been partly laid at the door of the trade tariff dispute. This in turn has led to the Fed and many other central banks taking a more dovish stance towards interest rates. Expectations remain for continued strength in bond markets as Goldman Sachs has joined the list of bond bulls further lowering yield expectations for the year end.

The Fed have turned more dovish overall, but members do from time to time try and encourage the market not to get to ahead of itself over rate expectations. Should there be a satisfactory conclusion between the US and China in the coming days, could this mean the Fed will hold off in July from acting? Donald Trump would like to be re-elected as president and a strong economy will help his cause. Hence the continued pressure on the Fed as he looks to cut a deal with the Chinese.

The price of oil continues to climb higher. A refinery fire on the East coast of America and sharp fall in inventories, putting further upside pressure on the price. Total stockpiles of Oil and Gasoline have been falling, measured in days of supply. US crude exports hit an all time high. Stronger oil prices based on demand should suggest strengthening global economy. Oil is not the only commodity seeing demand as strong housing starts in China has seen demand for steel increasing. Tighter supply is pushing iron ore higher. Soft commodities such as wheat are also at year highs. Inflation expectations round the globe remain muted. The recent strength in these commodity prices could start to be reflected in inflation data.

This recent strength in commodity prices has seen a shift in performance from the defensive names over the past few days into the more cyclical areas such as oil and mining.

We have to wait until the 22nd of July to find out the next leader of the conservative party, why so long? Despite the Boris lead and his public utterances that we will leave on or before the 31st of this year, no matter what. Sterling appears more resilient, having climbed recently from 1.25 to the dollar

Posted on June 27, 2019 .