11 June 2019
Bassanese Bites: Bad news is good news – Week beginning: 10 June 2019
Global equities rebounded strongly last week, reflecting ongoing hopes of a US interest rate cut and signs that US trade tensions with Mexico at least would soon be resolved. And sure enough, Trump suspended planned tariffs on Mexico overnight following an apparent agreement to tackle illegal immigration. Sadly, the situation with Trump’s bigger sparring partner, China, remains unresolved. Trump yesterday threatened new tariffs if a deal with China could not be worked out at the June 28-29 G-20 meeting, though as yet President Xi Jinping hasn’t even confirmed if he’ll bother to attend.
But fear not – the big story right now is not the trade war, but the Fed’s likely reaction to it – with even Fed chair Powell recently hinting he’s open to an interest rate cut if need be. In a classic case of “bad news is good news”, Friday’s weaker than expected employment report saw stocks lift on heightened rate cut hopes.
In what appears a rogue result (given ongoing strength in other labour indicators) US employment grew by only 75K in May, or around 100K less than the market expected. The unemployment rate, however, held steady at a 49-year low of 3.6%. Despite that, wage growth remained reassuringly benign, with annual growth in average hourly earnings edging down to 3.1% from 3.2%.
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