Swiss economy coughs
By Arnaud Masset
Switzerland is suffering from the rise in geopolitical uncertainty. The gross domestic product fell 0.2% quarterly in Q3, compared to an expected increase of 0.4% and an improvement of 0.7% in Q2. Switzerland’s consumer price index rose only 0.9% annually in November, following an uptick of 1.1% in October and under expectations of 1%. This is its lowest since April, when it was only 0.8%. In its upcoming Quarterly Bulletin, released on 12 December, the Swiss National Bank will surely adjust both inflation and growth forecasts to the downside.
On Tuesday, despite a sell-off in equities the greenback fell across the board, with the dollar index giving up 0.64%. The Swiss franc was up 0.43%, while the Euro rose 0.55%. Investors are reducing their exposure to the buck amid expectations that the US Federal Reserve is almost done with its hiking cycle.
Excitement over US-China truce fades
By Vincent-Frédéric Mivelaz
Asian equities lost steam, as optimism over US-China trade softens. Japan’s Nikkei 225 is closing at -2.39% while Australian ASX 200 and South Korean Kospi indexes closed at -1.01% and -0.12% respectively. Hong Kong’s Hang Seng improved by +0.29% while China mainland CSI 300 gained +0.21%. Investors are realising that US-China relations have a long way to go. Tariffs of 25% on over USD 200 billion of Chinese imports are on the way. Chinese authorities are expected to send its negotiators as early as next week while US Trade Representative Robert Lighthizer is gearing up to represent the White House. On the agenda are: reduction of Chinese auto tariffs against US manufacturers (currently: 40%); purchase of US agricultural products; Chinese industrial subsidies; and intellectual property practices.
Peoples Bank of China Governor Yi Gang confirmed he will support the Chinese economy by further monetary policy easing. This will allow the Chinese Renminbi to recover slightly, which lowers the risk of further capital outflows. USD/CNY has lost 1.72% this week, trading at 6.8408 and approaching 6.8350 short-term.