On trade, the mood music definitely got better during the week. Talks are continuing and Bloomberg has reported that Trump is considering a 60 day extension for the China tariff deadline which is currently 1 st March. The base case for many on trade is that there will be a pause that lays out a series of policy milestones over the next several months while holding tariffs at the current level until goals have been reached. If the base case becomes reality, markets should view this as positive.
Turning to Chinese data, this week investors kept looking for clues that the stimulus enacted by the Chinese government is affecting the economy. Yesterday investors saw strong import data and this morning there was some monetary data which was stronger than expected. On the other hand, China’s slowing factory prices added to growth concerns in the region. So, there are some green shoots in the recent data regarding demand in China which is positive but investors are still not out of the woods yet on this topic.
Turning to Brexit, Mrs May’s “my deal or no deal” strategy was seriously undermined after the embarrassing parliamentary defeat of her Brexit plan B yesterday in the House of Commons. She lost the backing of the hard core Brexiteers and last night’s defeat brings into serious question her claim two weeks ago to have found “a substantial and sustainable majority” of MPs in favour of her approach. As such, it will heighten expectations that the Brexit date will be delayed, whether or not Mrs May reaches a deal with the EU. After this news, subjective probabilities have not changed and remain at 20% chance of a no deal Brexit, 50% chance of a delayed Brexit with a deal and 30% chance of no Brexit at all.
There’s nothing better than a whistleblower’s tale and Big Tech critic Roger McNamee has a whopper of one. His new book, Zucked: Waking Up to the Facebook Catastrophe , is just out and in it he lays out in detail how he tried unsuccessfully before the 2016 presidential election to alert Facebook to how bad actors were misusing the platform to try and swing voter sentiment. McNamee has a lot of credibility since he is a 20-year Silicon Valley veteran and was a seed investor into Facebook. It is likely think that more and more such books will emerge over the coming years and that politicians will start to come up with ideas on how to tax tech companies more aggressively. Only this week, California Governor Gavin Newsom proposed a digital dividend that would let consumers share in the billions of dollars made by tech companies in the state. None of these criticism and proposals will hurt tech companies in the short term but longer term this is a topic investors should follow. On the other hand it must be said that tech is here to stay, the book is selling well on Amazon!