Russia – China deal, Plans after Brexit, Trump set tarrifs, US PMI NFP

Nikolas Stylianou

03 December 2019

Russia serves China – Huge Gas Inventories

Russia get involved in a significant gas exports to South China through the state-owned company Gazprom. As Bloomberg announced earlier the 3km pipeline that the gas will go through is a major symbol of Russian President Vladimir Putin which will expand rapidly the Asian economies. The pipeline will begin to transport huge quantities of natural gas from its eastern border to the eastern regions while the relations with the west are constantly deteriorating.  Subsequently, Russia’s pipeline will connect to China’s gas network to supply fuel to all areas up to the east coast and as a result will satisfy the needs of rising energy. Russia and China signed a 400 billion dollars contract to supply 38 billion cubic meters of gas annually for 30 years to China, that means Gazprom will deliver around 10 million cubic meters per day while the minimum exports per day will be 5 billion cubic meters. All these factors may lead to higher oil prices with the potential of increased demand and according to recent price oil fluctuation we can observe a short-term upward movement.

 Conservatives Party plans for improving security after Brexit

 The party Conservatives known as “Tory” set as target to publish plans for improvement regarding border security in UK after the Brexit deal. They stated that if they win the general elections that will take place at December 12, will try to introduce an automated exit and entrance checks as one of many suggestions. This regulatory measure could potentially make it harder for people with serious criminal convictions to visit UK through Europe. The Labour expressed that in the event UK leave the EU will no longer have access to the European Arrest Warrant which ensures the secureness against terror and organized crime. On the other hand, Liberal Democrats say that the Conservative improvement suggestions will lead to bureaucracy and many delays. Pound dollar shows negative divergence and the pair is driven by sideways the last two weeks after expanded movement to the upside 

Trump set tariffs on steel and aluminium for Brazil & Argentina

 President of US Donald Trump brought again tariffs on steel and aluminium imports from Argentina and Brazil. Both countries were accused from the President for their currencies devaluation which harmed farmers on US due to cheap exports to those countries and as a result called again the Federal Reserve to loosen monetary policy. In general US farmers facing crisis especially after the China-US trade war. Note that these countries’ currencies are known as non-deliverable because is unable to distinguish the fair spot price value to the current price value of Dollar. In addition, Trump said that the two South American countries have been presiding over a massive devaluation of their currencies which is not good of US farmers. According to Bloomberg Brazil is the third largest exporter of steel into the United States, behind Canada and Mexico. Brazil exports around 12% of steel to United States compared to 0.2% from Argentina.

US PMI & Non-Farm Payrolls

 Manufacturing Purchaser Managers Index was expected to lighten the recent manufacturing downturn in the United States, regarding exports, business spending and retail sales, however the Index showed on Monday that there is a lack of confidence. There is a lack of confidence also for US – China trade deal which has direct effect on US dollar. On Monday dollar showed weakness against Euro after PMI news released. Trump intent to set higher tariffs to France on goods that worth around 2.4 billion dollars. The planned levies come in response to France’s digital tax, which mostly hurts US technology firms. It should be interesting to see how NFP will affect dollar pair on Friday. As Jerome Powell said US economy is “glass more than half full”, with the expectation of Gross Domestic Product to be increased. The investments on the durable goods showed an increased during October. The latest NFP report showed 128k new jobs contrary to the prediction of 89k. This indicates a stable economy growth in US and employers still hiring more employees. Remains to see whether Euro still worsening against dollar or will see a short recover with the potential to see higher highs.