I remain optimistic that we will get a trade deal between US and China and it can happen by the end of this month, said Peter Cardillo, Chief Market Economist, Spartan Capital Securities, in an interview with ET Now.
What are you expecting as a result of the Brexit vote?
There is a good possibility that the British Parliament may actually approve it and that would be a win-win situation for Theresa May and obviously would be less of a chaotic divorce from the EU.
Globally, if you look at the kind of concerns that we are dealing with — be it the Chinese economy, the US economy, Brexit — all continue to be a big overhang on the markets. How are you reading into the overall trade set up? Where do EMs picture in this entire scenario?
There is no question that the global economy has slowed. Obviously, the US economy has slowed as well. Just 20,000 new jobs were created and yesterday we had retail sales numbers and if you really look at the indicator and examine it, you will see that it was not really all that positive.
There is no question that the US economy has slowed. That takes us back to a very important factor because with the Chinese economy slowing at a fairly past pace as well, both countries, need a trade deal. I remain optimistic that we will get a trade deal and it can happen by the end of this month.
The would lift a lot of uncertainties and give a boost to investors and consumers confidence as well. That probably means we could avoid a hard landing in China and even slower growth in the US.
What is your view on the central banks’ policy stance across the key economies to give a fillip to the overall economic picture? Is it good enough a measure or would they need more stimulus and more support going forward in order to sort of at least sustain the growth if not see a pickup?
Last week, ECB gave us a surprise. Mario Draghi had to backtrack on his plans to tighten the interest rates and basically offer cheap loans to the banks and so that is the first step of a stimulus move. I suspect that with the EU economy risk staying on the downside, there probably will be some more stimulus.
Obviously, we are getting that in China as well as in the US. The Fed probably is going to hand-hold the economy longer than we had expected previously, but that does not rule out another rate hike at the end of the year, especially if we get a trade deal.
We think the central banks are leaning towards stimulating because of the trade war which has taken a big bite out of the Chinese and affected the US economy as well.