1. All Aboard The Stimulus Express
China has signaled its intentions to open its wallet once more and cough up an estimated $296.21 billion stimulus package to offset Q4’s dismal trade and manufacturing data. It’s a good thing the world’s second largest economy has such deep pockets!
So far, monetary stimulus has done little to save China from the ravages of its trade war with the US and now President Xi Jinping is looking to get a bit more forceful with the reigns of the economy.
Analysts are murmuring about sizeable cuts in taxes and fees and even larger endowments for local governments to spend on infrastructure projects to drag China out of its downward growth spiral. While positive developments in trade war talks have boosted Asian markets from their October lows, the damage done to international trade will have a lingering effect on the region.
The stimulus package is predicted to add roughly 0.46% to GDP, benefiting China’s construction, manufacturing, and basic materials producers the most. The goal is to generate growth in small and medium sized businesses through targeted lending without flooding the economy and putting pressure on its currency.
China had a rough 2018, but President Xi is taking the gloves off in 2019. The stimulus express has left the station. Next stop growth?
2. US Auto Comeback
Amidst extensive skepticism about a weak macro environment, the US auto market is making a considerable comeback in 2019 with both GM and Ford entering new bull markets. Now that’s the American muscle we like to see!
Despite a persistent chorus of analysts shouting down the prospects of a growing US automotive industry, Ford and GM have managed to snatch back 21% and 23% respectively from their December lows.
GM managed to silence the naysayers expecting dismal guidance numbers from US firms by posting a positive outlook for 2019 last Friday and bouncing 7% on the day to cap off a strong week.
The recent bout of auto optimism has also been fueled by a budding relationship between Ford and VW on innovative commercial, electric and self-driving vehicle solutions in the pipeline.
The collaboration is set to save both firms billions of dollars every year and may be the X-factor that helps the US automotive industry weather the persistent effects of the trade war and slowing global growth.
Positioned a long way off their 52 week highs, both companies still have extensive upside potential should investors start believing in American muscle again. Long may the comeback last!
Today we are watching…
1. JP Morgan Chase (#jpm)
JP Morgan is the next big bank on the chopping block to report earnings after Citi published better than expected results yesterday. The consensus in the market is mixed with some expecting a neutral outcome while others are banking on it to outperform. Citi’s lower bond trading figures will worry the trade-heavy JP Morgan, but at the moment the outcome is anyone’s guess!
2. Delta Air Lines (#delta)
The highly-anticipated release of Delta’s earnings data is on the cards for today and airline investors will be watching closely. With competitors slashing revenue estimates towards the end of the year and Bank of America’s recent ratings downgrade from buy to neutral, things are looking grim for Delta. The consensus earning per share estimate is $1.27 and revenue is $10.77bn. Let’s see if Delta can pull a positive outcome out of the bag!