World week ahead: Trump takes trade mission to China

US President Donald Trump's first trip to Asia this week looks set to dominate financial market news this week, given the importance of the US-China trade relationship.

Before reaching Beijing he will have met leaders in Japan and South Korea, later going to Vietnam for the Apec summit and then another multinational meeting in the Philippines.

Also at Apec will be Russian President Vladimir Putin. Security concerns in the Korean peninsula and the South China Sea will grab a lot of attention. But investors will also look at trade developments, though nothing is expected in the way of US accusations that China employs unfair practices.

In Beijing, Mr Trump will be joined by executives from more than two dozen US companies planning to announce trade deals they say will be worth billions of dollars.

But the deals – involving soybeans, aircraft and natural gas among other products – are unlikely to dent the $US347 billion US goods trade deficit with China last year, 

Churn at the Fed
Back home, the naming of Jerome Powell as the next chairman of the US Federal Reserve, subject to Senate approval, has been accompanied by reports that Federal Reserve Bank of New York president William Dudley is set to announce his retirement, six months earlier than scheduled.

Though unrelated to Mr Powell’s appointment to succeed chairwoman Janet Yellen when her term as chief expires in February, Mr Dudley has been her close ally in recent years.

A former Goldman Sachs chief economist, he is vice chairman of the interest-rate-setting Federal Open Market Committee.

Last month, Fed vice chairman Stanley Fischer stepped down, replaced by Randal Quarles, Mr Trump’s first nominee to the Fed board of governors. Three other seats on the seven-member board are also open, giving the president an opportunity to remake its policy-making team.

A fourth seat could open if Ms Yellen decides to leave. However, she can stay on as a governor, if she chooses, in a term that extends to 2024.

Apple leads Wall Street higher
Last week, world stock markets advanced for a seventh straight session and the US dollar strengthened, buoyed by a round of economic data highlighted by the monthly payrolls report.

Wall Street also received a boost from a 2.6% gain in shares of Apple, a day after the iPhone maker reported quarterly results.

US job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp slowdown in annual wage gains and surge in the number of people dropping out of the work force cast a cloud over the labour market.

On Friday, the Dow Jones Industrial Average rose 22.96 points, or 0.1%, to 23,539.22, the S&P 500 gained 0.3% to 2587.84 and the Nasdaq Composite added 0.7% to 6,764.44.

For the week, the Dow rose 0.45%, the S&P gained 0.26% and the Nasdaq climbed 0.9%. The Dow and S&P have risen for eight straight weeks while the Nasdaq has climbed six weeks in a row.

“Investors don’t want to miss the next new high tomorrow,” says Nicholas Angilletta, head of capital markets for Deutsche Bank Wealth Management Americas.

European shares also closed higher, boosted by technology stocks.

Oil at two-year high
Oil prices have reached their highest level in more than two years as global economic growth helps boost demand for the extra oil and fuel that has weighed on the market.

Prices have also been buoyed by the Opec-led production cuts that have pushed US crude to over $US55 a barrel while Brent broke through the $US60 mark.

“I think the prices are already reflecting an extension of the OPEC deal,” says Tariq Zahir, managing member of Tyche Capital Advisors. For now “it’s kind of a wait-and-see game.”

Meanwhile, Saudi Arabia’s King Salman, or more accurately his Crown Prince son Mohammed bin Salman, ordered a new wave of arrests at the weekend, targeting dozens of royals and cabinet ministers in a crackdown against alleged corruption.

Among them was billionaire Prince al-Waleed bin Talal, one of the world’s best known investors,  who faces charges of money laundering.

All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.