- US/Chinese trade talks continue tomorrow in Washington
- Key meeting on Wednesday of EU ambassadors will determine whether US/EU trade talks will be delayed
- PM May will hold a long cabinet meeting today to decide on near-term path
- Feb U.S. durable goods orders expected to remain weak
- U.S. vehicle sales expected to show an improvement from 1-1/2 year low
- Caixin services PMI expected to round out China’s March PMI reports with another win
US/Chinese trade talks continue tomorrow in Washington — Chinese Vice Premier Liu and his team arrived in Washington on Monday for another round of US/Chinese trade talks that will officially begin on Wednesday. There are market hopes that the two sides are getting close to a final agreement since reports say the two sides are now focused on ironing out the differences between the US/Chinese translations in the 120-page draft agreement.
Key meeting on Wednesday of EU ambassadors will determine whether US/EU trade talks will be delayed — EU Ambassadors will meet in Brussels on Wednesday to decide whether to give EU Trade Commissioner Malmstrom the mandate she needs to begin formal US/EU trade talks. President Trump and European Commission President Juncker agreed a long time ago in July 2018 to begin those talks.
Yet the EU Ambassadors on Wednesday may not approve that mandate due to objections from France regarding its view that the EU should not negotiate trade deals with countries that are not part of the Paris Climate Agreement, according to a report yesterday by Bloomberg. If an EU negotiating mandate is held up much longer, President Trump may lose patience and go ahead with his threat to slap tariffs on imported European autos. President Trump is already unhappy about the EU’s refusal to meet his demand to add agriculture to the industrial and auto sector trade talks.
The Commerce Department’s recommendation on whether President Trump should impose tariffs on imported autos based on national security grounds has not yet been made public. However, there is virtually no doubt that the recommendation is that the tariffs should be imposed, in line with Mr. Trump’s demand on the topic.
M May will hold a long cabinet meeting today to decide on near-term path — Prime Minister May has called for a 5-hour Cabinet meeting today with three of those hours reserved for political talks. There is speculation that the Cabinet will discuss the way forward on Brexit as well as the possibility of calling new elections. Ms. May last week hinted that she might call a snap election when she said, “I fear we are reaching the limits of this process in this House.”
The UK Parliament on Monday held another round of indicative votes on various Brexit Plan B options but none of the measures received a majority vote. Still, the vote for the UK to remain within a customs union failed by a margin of only 3 votes and failed to get a majority by only 12 votes after accounting for abstentions. The vote for a confirmatory public referendum on a final Brexit deal lost by a margin of only 18 votes (280 in favor and 292 against).
Ms. May is still holding out hopes for pushing her Brexit withdrawal agreement over the line with a fourth vote, but the votes are still not there. The margin of defeat in last Friday’s third vote was a hefty 58 votes, but that was substantially better than the 149 margin in the second vote and the 230 margin in the first vote. Ms. May has until next Friday’s April 12 deadline to get her deal approved. There may be another round of indicative votes on Wednesday.
If the UK Parliament cannot pass Ms. May’s Brexit separation agreement by next Friday (April 12), then there are only two outcomes — either a no-deal Brexit or a UK request for a long Brexit deadline extension. While no one wants a chaotic no-deal Brexit next Friday, there is still the possibility of that outcome because the EU will require the UK to hold EU elections on May 23, something that Ms. May has tried to avoid. In addition, some EU countries do not want to give the UK a long extension because of fears that the UK might stir up trouble if it remains in the EU Parliament. Indeed, the European Commission last Friday said that a no-deal Brexit is now “a likely scenario” and said that the EU is ready for that outcome.
Yet the likeliest outcome is that cooler heads will prevail, and the UK will get its long Brexit extension. If there is a long extension, then the odds increase for a new election or possibly a second referendum for a do-over Brexit vote. The EU will hold an emergency summit next Wednesday (April 10) to deal with Brexit.
Feb U.S. durable goods orders expected to remain weak — The consensus is for a Feb durable goods orders report today of -1.8% and +0.2% ex-transportation following Jan’s +0.4% and -0.1% ex-transportation. Today’s Feb core capital goods orders report (capital goods new orders ex defense and aircraft) is expected to show a small increase of +0.1% after Jan’s report of +0.8%. The prospects improved for the U.S. manufacturing sector going into March on a stronger note after yesterday’s news that the March ISM manufacturing index rose by +1.1 points to 55.3 and the new orders sub-index rose by +1.9 points to 57.4.
U.S. vehicle sales expected to show an improvement from 1-1/2 year low — The consensus is for today’s Mar total vehicle sales report to show a modest improvement to 16.80 million units from Feb’s 1-1/2 year low of 16.56 million. U.S. vehicle sales have recently slumped along with consumer spending in general. From July through January, U.S. retail sales fell by an overall -0.4%.
Caixin services PMI expected to round out China’s March PMI reports with another win — Tonight’s China Mar Caixin services PMI is expected to round out the string of strong March PMI reports with a solid +1.2 point gain of to 52.3, which would reverse about half of Feb’s -2.5 point decline to 51.1. Regarding the March manufacturing PMIs, the national PMI rose by +1.3 to 50.5 and the Caixin PMI rose by +0.9 to 50.8. The March national non-manufacturing PMI rose by +0.5 to 54.8.
