Hopes of a trade deal

February 2019

US equity markets rose during February as investor sentiment was buoyed by hopes that the US and China will finally manage to reach agreement on their long-running trade dispute. The US announced it would delay its scheduled tariff increases on Chinese imports and, although the two countries failed to reach an agreement at their February meetings, President Donald Trump appeared sanguine that a deal would be finalised soon.  

  • President Trump declared a national emergency in a bid to fund his wall
  • The US economy grew by 2.9% in 2018
  • The partial shutdown of the federal government affected unemployment data

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US equity markets rose during February as investor sentiment was buoyed by hopes that the US and China will finally manage to reach agreement on their long-running trade dispute. The US announced it would delay its scheduled tariff increases on Chinese imports; these increases were supposed to take effect on 1 March and would have raised levies on goods from 10% to 25%. Although the two countries failed to reach an agreement at their February meetings, President Donald Trump appeared sanguine that a deal would be finalised soon.  

“The US bull market is scheduled to mark its tenth anniversary on 9 March” 

The Dow Jones Industrial Average Index rose by 3.7% during February, while the Nasdaq Index climbed by 3.4% and the S&P 500 Index rose by 3%. The fourth-quarter earnings season was drawing to a close by the end of February. Of the 485 companies that had reported, 68% beat earnings forecasts, 7% were in line, and 25% failed to meet expectations, according to S&P Dow Jones Indices. The best-performing industry sector during February was information technology, followed by industrials and utilities. The worst-performing sectors were consumer discretionary and real estate; nevertheless, every industry sector ended the month in positive territory. The US bull market is scheduled to mark its tenth anniversary on 9 March. 

President Trump declared a national emergency after Congress refused to fund his US/Mexico border wall. Although the House of Representatives voted against the President’s emergency declaration, the margin failed to reach the two-thirds required to overrule a Presidential veto.

The US economy grew at an annualised rate of 2.6% during the fourth quarter of 2018, having expanded by 3.4% in the third quarter. The rate of consumer spending decelerated over the period, falling from 3.5% to 2.8%. Over 2018 as a whole, the US economy grew by 2.9%, compared with growth of 2.2% in 2017 and 1.6% in 2016. 

The economy created 304,000 new jobs in January, compared with an average monthly increase of 223,000 per month during 2018. The rate of unemployment rose from 3.9% in December to 4% in January as the partial shutdown of the federal government took its toll. Average earnings rose at an annualised rate of 3.2%. Meanwhile, consumer price inflation rose at an annualised rate of 1.6% in January, considerably below the Federal Reserve’s (Fed’s) target rate of 2%. Inflationary pressures were curbed by lower fuel prices. 


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