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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

Fed meeting minutes forward look: expected to reiterate the upcoming reduction in debt purchases

Oct 26, 2021 10:52

The Fed’s conditions for reducing the size of its debt purchases are “basically met,” and Fed Powell’s words have been echoing in the minds of traders. Perhaps the weak non-agricultural employment data may discourage the Fed from cutting its $120 billion monthly bond purchase plan. So will "almost" become "not yet"? The minutes of the Fed meeting will provide further answers.


The US economy only added 194,000 jobs in September, which is less than half of the expected 500,000 jobs. This is the second disappointing data in a row and may indicate a significant slowdown in recruitment. This may make people wonder whether it is necessary to tighten policies. One of the tasks of the Federal Reserve is to ensure full employment.

Another reason to think twice comes from the wage data in the non-agricultural employment report. As expected, the average hourly wage increased by 4.6% year-on-year. If more leisure and hospitality workers return to work, this number will be lower because their wages are relatively low. As these types of jobs increase, wage growth will be even higher.

Wage data shows that because consumers have less money in their pockets, inflation is lower. It should be noted that this estimate was completed before the September consumer price index statistics were released. However, the core CPI in August was lower than expected and fell to 4%.

A weak labor market and weak price pressures mean that the Fed needs more support. The Fed may postpone its official announcement of reducing the size of its debt purchases from November to December, resulting in more US dollars being printed—and therefore currency weakness. Is that right?

The decrease in leisure and hospitality employees returning to work is the result of the new crown pneumonia epidemic. The delta variant continues to cause havoc in the United States, causing customers to stay away from restaurants, leading to reduced recruitment. Recent coronavirus statistics show a decline in cases, which means that these jobs may be restored later.

In addition, returning to Powell's words-"almost satisfied"-means that the threshold for not reducing debt purchases is very high. In addition, the Fed has vowed to warn the market "long in advance" to prevent the "shrinking panic" of 2013. So far, the Standard & Poor's 500 Index has fallen 5% from its all-time high, which is not even the last formal correction-10%. So far, the Fed’s early warning plan is pretty good.

Therefore, the threshold for changing the Fed's thinking is high. The non-agricultural employment data is not very good, but it is enough to reduce quantitative easing - especially when the non-agricultural employment data in August has been revised upwards, which added about 131,000 jobs.

In general, the minutes of the Federal Open Market Committee (FOMC) meeting should reiterate the Fed's position that it is about to reduce the size of bond purchases.

If, as the above analysis implies, the Fed reminds the market that it is eager to reduce bond purchases, then there is still room for the U.S. dollar to rise and the stock market to fall. If the CPI data weakens, this reaction will be even more pronounced. The slowdown of money printing means that the currency is stronger, and the decrease in currency issuance means that the amount of dollars flowing into the stock market decreases.

If the minutes of the Federal Open Market Committee's meeting are not sure about reducing quantitative easing (given the noisy hawks within the Fed, this is unlikely), the dollar will fall and the stock market will benefit.