Blokland’s daily sketch

Blokland’s daily sketch


Hong Kong bill complicates trade deal, we reduce risk

  • Jeroen Blokland
    Head of Multi Asset

US congress unanimously passed the Hong Kong Democracy Bill on Tuesday, supporting Hong Kong protestors. President Trump is expected to sign off on it, risking ‘immediate’ retaliation by China. The Chinese yuan, a risk-on risk-off indicator, weakened in recent days. A statement issued by Hong Kong’s foreign ministry said, “Don’t say I didn’t warn you”, using a Chinese phrase that, prior to this year, has only used been in rare cases, like before China invaded India in 1962. This implies that the US and China will struggle to reach a phase-one trade deal, if they reach a deal at all. Given recent market developments, which have suggested a trade deal is in the making and lifted some uncertainty for export and manufacturing companies, we have reduced our weight in equities and remain cautious on high yield bonds. While a base case scenario of a marginal improvement in global growth and a return of positive earnings growth still applies, recent developments mean it could take longer for this scenario to materialize.

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As a senior portfolio manager I use charts to illustrate financial issues every day. I tweet my favorites as @jsblokland and was named 'one of the 50 most important people for investors to follow in 2018' by MarketWatch.
Previous editions of the daily sketch can be found on my personal financial markets blog. All graphics provided are collected from Bloomberg data and public websites. They do not always reflect my personal opinion and may also not necessarily reflect the opinion of Robeco. Please cite all references or quote the original source if replicating content.

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