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LGT Navigator: “Phase 1” trade agreement within reach

January 13, 2020

This week, the trading conflict will come back into focus, as investors are eagerly awaiting the anticipated signing of the “Phase 1” partial agreement between the US and China. The latest edition of the US monthly Labor Market Report was slightly weaker than expected, but is unlikely to have a direct impact on the Fed's interest rate policy. Meanwhile, capital markets continue to follow very closely the further development of the Iran conflict. 

US China Trade Agreement

In the next few days – probably on Wednesday – China's Deputy Prime Minister Liu He is expected to sign a first partial agreement in Washington. This should be an important first step towards a medium-term settlement of the trade conflict between the US and China. Subsequently, negotiations on a "Phase 2", or comprehensive trade agreement, are to move on to the next round. This would be a political success for both sides. US President Donald Trump, in particular, could score points as a “dealmaker” with a success story and take the spotlight off the ongoing impeachment proceedings.

In Asia this morning, stock exchanges started the new trading week mostly with gains, thanks to the prospect of a trade agreement being signed. In Japan, however, markets remained closed for a holiday. Meanwhile, after rising for a fifth consecutive week, the price of gold fell on this morning.

US employment growth slowed in December

The US labor market appears to have lost some of its momentum towards the end of last year. However, employment growth remains solid in the medium term, and the Federal Reserve (Fed) is unlikely to be worried about this, or at least continue its current wait-and-see approach for the time being. According to the Washington Department of Labor, 145,000 new jobs were created in December compared to a consensus forecast of 160,000 and a strong previous month's figure of 256,000 new jobs. Meanwhile, the unemployment rate, which is the subject of a separate study, remained at a record low of 3.5%.

Volkswagen's core brand with strong finish

Volkswagen was able to increase the worldwide sales of its core brand VW substantially in December, more than offsetting declines in North America with growth in China. Deliveries increased by almost +14% to 615,200 vehicles at the end of the year. While the Wolfsburg-based carmaker recorded a decline of almost -8% in North America, sales in China, including Hong Kong, rose by around +22%. In Europe, too, there was a solid +7.5% increase. For the full-year 2019, the core brand VW sold 6.28 million vehicles worldwide, a moderate increase of +0.5%. Volkswagen also announced that the number of electric vehicles delivered in 2019 rose by more than +60% year-on-year to more than 80,000.



Economic Indicators January 13 & 14

MEZ Country Indicator Last
10:30 UK Industrial Production (y/y) -1.3%
06:00 CN Exports (y/y) -1.3%
06:00 CN Imports (y/y) +0.5%
14:30 US Consumer Prices (m/m) +0.3%
14:30 US Consumer Prices (y/y) +2.1%
14:30 US Core Consumer Prices (y/y) +2.3%

Earnings Calendar January 14

Country Corporate Period
US JPMorgan Chase Q4
US Citigroup Q4



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Source: LGT Bank (Switzerland) Ltd.

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