China trade, India v. China: O2 Wealth Economic Update, June 19, 2020

U.S. and World News

  • In January, the United States and China agreed to a “Phase One” trade deal where China would be responsible for buying $36.5 billion in U.S agriculture products, an increase from $24 billion in 2017. Year-to-date, China has only purchased $4.65 billion, which is almost half as much purchased during the same period in 2017. Yesterday, Secretary of State Mike Pompeo said China’s top foreign policy official is still committed to the $36.5 billion in purchases for the year, despite the current shortfall. Pompeo tweeted on Thursday “During my meeting with CCP Politburo Member Yang Jiechi, he recommitted to completing and honoring all of the obligations of Phase 1 of the trade deal between our two countries”.
  • iran-china-1225077759_370For the first time in about 50 years, a border clash between India and China broke out after weeks of rising tensions along the disputed and undefined Line of Actual Control (LAC) that separates China and India in Ladakh and the Tibet region. The high altitude and sub-zero temperatures in the mountainous region led to the death of 20 wounded Indian troops. China has not confirmed the death of any of its troops and has accused the Indian army of provoking and attacking Chinese personnel. Both sides have held talks over the phone, agreeing to cool down tensions, expressing that they do not seek escalation to war. Despite the agreed de-escalation, China and India have sent additional military personnel to the region.

Markets

  • Markets rebounded higher this week. The S&P 500 spiked 1.28% and closed at 3,098. The Dow Jones rose 0.33% and closed at 25,871. Year-to-date, the S&P 500 is down -3.68% and the Dow Jones is down -8.98%.
  • Yields were relatively unchanged this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.34% and 0.71%, respectively.
  • The spot price of WTI Crude oil fell this week. Prices fell -1.42% and closed at $38.84 per barrel. Year to date, Oil prices are down -36.39%.
  • The spot price of Gold fell -0.34% and closed at $1,724.80 per ounce. Year to date, Gold prices are up 13.68%.

Economic Data

  • Initial jobless claims fell by 58,000 to 1.5 million and the four-week moving average of claims fell by 235,000 to 1.8 million. Claims increased by 22,000 in Georgia and by 16,000 in New York. Claims fell by 20,000 in Maryland, 16,000 in Massachusetts, and by 16,000 in Oklahoma.
  • Retail sales rose by 17.7% versus expectations for an increase of 8.4%
  • Core retail sales rose by 11.0% versus expectations for an increase of 5.2%
  • Industrial production rose by 1.4% versus expectations for an increase of 3.0%
  • Business inventories fell by 1.3% versus expectations for a decline of 1.0%
  • The level of housing starts rose by 4.3% to 974k units versus expectations for an increase of 23.5%
  • Building permits rose by 14.4% versus expectations for an increase of 16.8%

Fact of the Week

  • The nation’s 13.3% jobless rate as of 5/31/20 (released on Friday 6/05/20) would have been an estimated 16.3% if the workers who were being paid wages from funds obtained through a “Payroll Protection Program” (PPP) loan were counted as “temporarily laid off” instead of “actively employed” (source: Bureau of Labor Statistics).

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz – (630) 906-5467 ejgorenz@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com

Visit Old Second Wealth Management

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