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  • Unsurprisingly, Trumps threat of Mexican trade tariffs were rescinded. This follows criticism from US farmers, auto manufacturers and the general business community. Interestingly, not a single Republican politician announced their public support for these proposed tariffs. One hopes that Trump is slowly being educated in the globalized trade linkages that exist in today’s world. Trumps boast that the “new” deal would include large agriculture sales to Mexico is contrary to what is in the actual agreement and is something that Mexican officials plead ignorance of. If ill-founded bluster such as above is the ultimate conclusion to the existing US China trade issues we believe the world economy will materially recover from its recent slowdown.
  • The economic disruption of the last few weeks encouraged Jay Powell (Chairman of the Federal Reserve) to verbally highlight their awareness of the possibility of an economic slowdown caused by the trade war issues, which is just as well based on Fridays’ weak employment report.
  • Chinese authorities also provided new stimulus last week and just as with previous recent measures it was targeted towards the consumer. The consumer is becoming a more important component of Chinese GDP and authorities are reluctant to initiate a big fiscal capital spending plan at this time in light of the considerable amount of debt within the Chinese economy.
  • Mario Draghi (ECB) in the ECB post meeting press conference indicated that there had been discussions about further cuts to the deposit rate (presently -0.40%) and the re-starting of Quantitative Easing. Headwinds to global growth were acknowledged but could the ECB be behind the curve (the Bundesbank downgraded ’19 German GDP growth to 0.6% from a previous estimate of 1.6%). Certainly, the levels of inflation (see chart) would allow further stimulus although investors are concerned that the ECB may have reached its limits on monetary policy – maybe EZ governments, via fiscal policy, should take the baton from here?