Evidence of a traffic jam in the making of a simple agreement between the US and China was no obstacle. The discrepancies deepened this week: Trump does not want to cancel the rise in tariffs he used as a pressure tool, and the Chinese do not commit in writing to make purchases of agricultural products in the amount Washington wants. However, the routine is sacred. Xi Jinping burst first. He said Beijing wants to avoid war, and wants a pact "on the basis of mutual respect and equality." Then Trump appeared, who pointed out that the arrangement is "very close", but it would not be a balanced agreement. And how did the Dow Jones respond? With a breakthrough that broke a bad run of three days down, but could not bash the seventh consecutive week on the rise. The Dow Jones climbed 109 points. I lied that I like it.
Knowing the trick, however, its performance in the margin is decreasing. Trump and Xi, together, failed to replicate the Kudlow effect, barely more than half of the rise. What to expect next Friday? Who to give homework? If reality does not collaborate, perhaps the Pope can scratch a miracle tie.
Markets distrust, but not so much. Wall Street backed away, narrowed its ambition, preferred not to insist on the upside. However, it remains crouched at less than half a percent of its brand new highs, ready to tip another blow with the backs somewhat more covered. That everything is not talkative either. Whether theater or not, it is unusual for Xi and Trump to synchronize a step on stage, with a constructive script. The slight mismatch of the text does not matter as the common will to support the idea of an agreement. Both need it (rather, everyone, including outsiders).RELATED
The world economy was scraping into a recession, and the danger persists (and would return as a boomerang if hostilities are rekindled). Both understand it. Trump, with his little outburst about equality, perhaps reveals an unsolved inner tug. The commercial pax removed Damocles's double sword from the bear market and the recession, but can't an extra advantage be taken by pressing Xi with Hong Kong? And it doesn't seem likely to deliver the toy of tariffs. In any case, the scope of the agreement to be signed could be liquefied a little more. Trump no longer demands the commitments of a year ago; ask for a simple agreement, "phase one". Can't you sign a mid-stage one? How was the media dispute with North Korea settled?
The real news is another. And it's substantial, not a mirror game. The US economy, finally, loves to take flight. The activity, measured by the Markit PMI lightning indexes, the first ones coming out of the oven (with preliminary information) accelerated the pace in November. If you consider the total activity, it grew at its fastest rate since July. The sector most damaged by the storm – manufacturing activity – nailed a maximum of 7 months (and the production of manufactures, 10). The services, which kept the situation afloat, continue in the stern (at a maximum also since July). Could you say that the bump was left behind? Markit's chief economist thinks so, that the worst happened. In fact, after a couple of months of payroll cuts, the companies covered by the survey resumed the hiring of personnel to meet an incipient accumulation of pending jobs. It is still early to sing victory (Wall Street is always anticipated), but it is more premature even to start lowering positions. That the Bridgewater fund set up a short exposure of one billion dollars in favor of a stock market crash over the next three months? It would be good, from a contrarian point of view, but his strong man, Ray Dalio, simply says that it is not true.