World markets rally on Monday following US President Donald Trump executive actions over the extension of unemployment payments, prevention of home evictions, and payroll tax cuts.
Trump actions
Speaker of the US House of Representatives Nancy Pelosi described the executive orders Trump signed as “absurdly unconstitutional”, but did not clarify whether she would sue the White House for overriding authority.
Pelosi and Treasury Secretary Steven Mnuchin said on Sunday following after weeks of unsuccessful negotiations, that they were open to resuming negotiations for an economic aid package to ease Americans’ financial woes.
The two-week inter-party debates on the fifth aid package bill, aimed at mitigating the widespread and shocking impact of the coronavirus epidemic on the world’s number one economy, ended on Friday after no consensus was reached on unemployment benefits and protection against evictions.
On Saturday, Trump took matters into his own hands by signing executive orders and memoranda extending unemployment benefits, preventing home evictions, delaying student loans, and cutting payroll taxes.
Greenback recovery
Trump’s steps to stimulate the economy with limited but disputed action have been welcomed by the US stock markets.
The dollar index also started to recover after a decline in July, when it lost a total value of 4%. The dollar recovered on Friday after nonfarm payroll data calmed some fears about the US labor market.
The index remained stable during the Asian session but rose by 0.30% to 93.70 in the morning trading hours in Europe and before the US opening.
The resurgent strength of the dollar also stems from the US imposing new sanctions on Hong Kong and Chinese officials.
Chinese data
China’s factory deflation eased in July, with global oil prices rising and industrial activity going back to pre-coronavirus levels, demonstrating continued recovery in the world’s second-largest economy.
The Bureau of National Statistics (NBS) said on Monday that the producer price index (PPI) fell 2.4% from the previous year. Analysts who participated in a Reuters survey expected a 2.5% drop. The figure was a 3.0% decrease in the previous month.
However, PPI increased by 0.4% on a monthly basis, unchanged from the increase in June. The disruptions in the construction and manufacturing sectors caused by the recent floods in southern China affected the PPI.
The consumer price index (CPI) increased by 2.7% compared to the previous year, recording the fastest increase in the last three months. For the figure recorded at 2.5% in June, the expectations were towards 2.6%.
Hong Kong arrest
China’s new national security law, which has strained ties between the US-led Western alliance and Communist China for the past few months, came back on the agenda on Monday following the detention of well-known democracy activist and media mogul Jimmy Lai in Hong Kong.
Lai is one of the CCP’s foremost opponents in the city. Lai, who resisted the Beijing government on issues such as democratic elections, an independent judiciary, free speech, and press earlier said that he would not leave the city after the law passed, and was ready to go to prison for these values.
Taiwan crisis
US Health Secretary Alex Azar visited Taiwan on Sunday, which Communist China claims as one of its provinces. Azar met with the president of the democratic Chinese island, Tsai Ing-wen.
While China condemned Azar’s visit, it reminded the US that the Washington-Beijing relations established in 1979 were based on the “One China policy”.
“Taiwan is the most sensitive issue in US-China relations,” a spokesperson for the Chinese Foreign Ministry said in a press briefing on Monday. The “One China policy” is the political basis of these relations. The latest US action seriously violated its commitments to the Taiwan Question.”
EU-US tariffs
13 US senators from both parties wrote a letter to the US Trade Representative Office (USTR) asking the Trump administration to lift 25% tariffs on European Union food, wine, and spirits that it put in place in October 2019.
The tariffs in retaliation for EU subsidies for large aircraft hit a range of products worth $7.5 billion, including French wine and olive, German coffee, Italian cheese, and single malt Scotch whiskey, as well as cookies, salami, yogurt, and pork sausage.
Seven Republicans and six Democratic senators wrote to the USTR on Friday that American restaurants, retailers, grocery stores, importers, and distributors were “experiencing serious economic difficulties due to rising commodity costs.”
The US won a 16-year long lawsuit at the World Trade Organization last year against the EU’s granting of state subsidies to the aircraft producer Airbus, getting the right to impose tariffs on EU goods.
