U.S., Europe, China: Hunting the Grey Rhino

U.S., Europe, China: Hunting the Grey Rhino

Trade negotiators and leaders in North America, Europe and China work to support global growth and avoid the potential for damage from looming, hard-to-track threats.

“No country can alone address the many challenges facing mankind; no country can afford to retreat into self-isolation."
China’s President Xi Jinping

U.S. jobs, growth and NAFTA: Trade and tradeoffs Thursday brought news that initial claims for unemployment insurance fell 22k to a seasonally-adjusted 222k, a low not seen since March 1973 – over 44 years ago. That’s in an economic environment of slow but steady GDP growth, sluggish wage growth and a NAFTA trade regime that’s strongly favored by many businesses currently benefitting from its streamlined trade provisions.

It’s still unclear what the effect of a renegotiated trade regime would have on the U.S. workers in whose name these changes are being proposed. But the uncertainty created by talk of making changes – however appropriate they may be to a changing global trade dynamic – could chill the capital spending plans of the companies involved. Which, in turn could affect the possibly fragile economic growth of the year ahead.

European growth: Brexit and its discontents The prospect of a stalemate in the negotiations over the terms of the post-Brexit era appears to have concentrated the minds of the leaders of the two most important countries involved.  Prime Minister Theresa May and German Chancellor Angela Merkel took great pains to stress their joint commitment to a successful outcome. But with Chancellor Merkel stating her belief that negotiations won’t be on the docket until December at the earliest, and Prime Minister May expecting “ambitious plans for the weeks ahead,” it’s unclear how progress will be made in the immediate term.

OPEC: 86% on board  This past Tuesday, the International Energy Agency (IEA) reported OPEC’s compliance with its own output curbs to be about 86% for the month of October.  According to IEA executive director Fatih Birol, that’s “higher than in the past, [but] whether or not they will continue with this plan in November [is] up to them.” The IEA also reported a significant amount of inventory in the markets at “higher than historical averages,” and noted the increased amount of geopolitical uncertainty as a possible factor in pricing. As of Friday, West Texas Intermediate crude traded at $51.42 per barrel; Brent crude traded at $57.48.1

China: Party Congress The twice-per-decade Party Congress took place amid news of China’s economy’s expansion rate of 6.8% in the third quarter of 2017, the same as in Q1 and Q2, and factory prices jumping 6.9% in September year-over-year, and manufacturing producer prices rising 7.3%, the most in nine years. Perhaps the price increases were a sign of China’s success in trimming capacity in producers of steel and cement.



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