Thought Of The Week
U.S Mixed Economic Data, ECB Meeting
U.S stock indexes closed modestly higher this week amid earnings optimism even though cases of delta variants continue to rise and latest economic data showed mixed signals. Existing-home sales rose 22.9% from a year earlier as continued strong demand pushed the median U.S home price to a record high while jobless claims unexpectedly climbed to 419,000 vs 350,000 estimate. Meanwhile, ECB meeting concluded with a dovish policy guidance to “avoid premature tightening that would be detrimental to the economy” and will keep record-low negative interest rates in place for as long as needed to revive price stability. Lagarde’s remarks reverberated across Europe’s government bond market, with investors piling into the debt of the region’s most economically vulnerable nations such as Italy and Spain.
U.S-China Bilateral Trade
Despite the trade tariffs imposed by the Trump administration 18 months ago and the ongoing tensions over Hong Kong, Taiwan, accusations of technology theft and other flashpoints, U.S and China are still shipping goods to each other at their fastest pace. According to Chinese trade data, bilateral trade has rebounded to fresh records after tumbling to $19 billion last year amid shutdowns in Chinese factories and trade surplus with U.S remains wide even though U.S data tell a much different story. Federal Reserve economists Hunter Clark and Anna Wong argue that the discrepancy was likely due to misreporting by both the Chinese exporters and U.S importers since the Chinese exporters could get higher value-added tax rebates if they over-reported the value of exports while the U.S importers could pay less tariffs if they under-reported the value of goods imported from China.
Although the Biden administration has yet to announce any plans to revamp the existing trade deal, it is evident that winning trade wars with economic barriers such as tariffs would be an arduous journey since the deal did not address the fundamental problems with China. With China nowhere near achieving its purchasing targets for U.S goods by the end of the year and the hard stance by U.S Trade Representative Katherine Tai calling the trade relationship “unbalanced”, trade tensions are likely to continue to linger in the backdrop.
Billionaires Space Travel
Whoever said that money can’t buy happiness probably has not travelled to space. Shortly after Virgin Galactic sent the company’s founder Richard Branson to the edge of space last week, Jeff Bezos, ex-CEO of Amazon and founder of Blue Origin, took the title this week. The capsule touched down safely after reaching an altitude of more than 105 kilometers above ground level which Bezos described the 10-minute flight as his “best day ever” and “more than he’d dreamed of”.
After all, one needs to first bid in an online auction for a ride into space and the winning bid was $28 million. The highly publicized trips demonstrated the potential for space-tourism ventures which are likely to entice wealthy clients to pay big money for a unique travel experience. Meanwhile, China’s ultra-rich are taking a lower profile route by focusing on businesses like satellite manufacturing and rocket launching instead of space tourism. However, it is only a matter of time before these Chinese tycoons commercialize the infrastructure that are being put into place.
Chart Of The Week
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