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Snakes And Ladders

The first full trading session of the 2020s got off to a positive start, but many investors will have extended their end of year holidays to restart on Monday (but some countries have that as a public holiday to mark “Three Kings”). Broadly, the optimistic start was down to news of a putative “phase one” trade accord between the USA and China that President Trump said will be signed at The White House on 15th January 2020. It does not mark the end of the trade dispute, but seeing as this is the traditional time for optimism, perhaps it signals the beginning of the end of it. A second reason for the upside gains was the news that China is relaxing its requirements for the liquidity which its banks must hold, thereby (potentially) boosting the money that they can lend to businesses.

The details of the Phase One agreement have yet to fully emerge, but it is understood that the US will ease sanctions of $360 billion worth of Chinese goods destined for the US market and that China has agreed to purchase more US agricultural produce and has granted other concessions.

The Central Bank of China announced that it would reduce borrowing costs for businesses this year and add £87 billion to the economy by reducing the liquidity requirements for its banks. The moves are intended to boost the Chinese economy which had been slowed as a result of US trade decisions and a general slowing of the global economy.

On the negative side of the balance sheet, a decision by the USA to target an Iranian General visiting Baghdad with a fatal drone strike has ratcheted up geopolitical tensions and led to a spike in the oil price over concerns about Iranian retaliation. The strike was ordered by President Trump directly and killed General Qassem Suleimani, a powerful figure in the Iranian regime. Justifying the attack as a defensive action, a Pentagon statement said:

“General Suleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region. This strike was aimed at deterring future Iranian attack plans.”

Dr. Mike Campbell
About Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

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