Markets in Details: 19 June 2019

19 June, 2019

Facebook unveiled its own digital coin on Tuesday called Libra which it aims to bring to market in the year 2020 to its 2.4bn  customers and 1.7bn people worldwide who do not have access to a bank account. The project is carried out by a consortium of 28 companies which counts Uber, Spotify, Visa, Mastercard and Paypal as backers. The company is clearly focused on mass adoption which could potentially render other stablecoins obsolete overnight.

U.S. manufacturing show signs of trouble

The U.S. Empire State Manufacturing index which is a manufacturing gauge for the New York area fell to its lowest level in three years and clocked the first negative reading since 2016 fueling worries about where the U.S. economy is heading. The underperformance signals both diminished business conditions and expectations across several categories.

Pressure at the Fed

Report emerged on Tuesday that the White House explored the legal basis for removing Fed Chair Jerome Powell in February.  Such a move by the White House to put pressure on the Federal Reserve is becoming a norm of the Trump administration. Markets are watching to see if the Fed would succumb to the president’s political influence.

China’s smart play

Whilst the U.S.-China trade war is ongoing, China has been quietly reducing tariffs on goods from its non-U.S. trading partners, potentially creating a lasting cost disadvantage for the U.S. which could hurt exports in the long run.

U.S. exports of lobsters  to China as an example, dropped as much as 70% after China raised tariff last year whereas Canada’s exports of the seafood almost doubled due to China’s tariff cuts.

Trump, who just recently rolled out his reelection campaign, is under increased pressure to make a deal with China as hundreds of businesses and trade groups have written in to express concerns of permanent damage due to the trade war.

Companies are worried that business rivals from other countries can work with China more cheaply than American companies can i.e. putting them in a clear competitive disadvantage.

The smart move by China may have brought the U.S. back to the negotiating table to limit the damage to the American economy and to also bolster Trump’s reelection chances in 2020.

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