After the trade conflict is before the trade conflict

In December, the markets reacted with relief to the "Phase One" trade agreement, which is ready to be signed and is intended to settle the trade conflict between the USA and China. At the same time, the EU, especially France and Germany, moved into the focus of US and Chinese trade policy.

In December, the international stock markets, with few exceptions (Australia, Thailand), gained. The German stock index DAX rose moderately by 0.10%, while the broad European index Stoxx Europe 600 increased by 2.06%. In the USA, the S&P 500 Index rose by 0.91% and the Hang-Seng Index (Hong Kong) climbed by 5.49%. The global MSCI World Index rose by 0.94% - all index data in euro terms.

By contrast, the bond markets were under pressure, as can be seen from the yields on high-quality 10-year government bonds. Their yield rose from -0.36% to -0.19% in Germany and from 1.81% to 1.92% in the USA.

A key factor in the rising equity markets was the "Phase One" trade agreement that the USA and China agreed on and which is due to be signed in mid-January. In the agreement, the US waives the introduction of various announced import duties, and China announced that it would import significantly more agricultural goods from the US. The US, Canada and Mexico also signed a trade agreement to replace NAFTA.

As a result, China's purchasing managers' indices for industry and services rose, and industrial production increased by 6.2% year-on-year, compared with only 4.7% in the previous month. In the US, 266,000 new jobs were created in December, as many as last seen in February 2019, and the unemployment rate fell from 3.6% to 3.5%. Consumer spending and retail sales also rose in both countries.

In Europe, the markets initially also reacted positively to the British House of Commons elections, which the Conservatives under Prime Minister Boris Johnson were able to clearly win. This result made it clear that Great Britain will certainly leave the EU. However, after the election victory, Johnson announced that the trade agreement between the EU and Great Britain would have to be agreed as early as the end of 2020, which again raised fears of a hard Brexit among some market participants.

In Germany, the ifo business climate index improved again, rising from 95.1 to 96.3 points. However, various German and European economic data continued to disappoint. For example, the purchasing managers' indices for industry in Germany and the euro zone declined - with values well below the threshold of 50 (43.4 and 45.9 respectively), both point to a shrinking economy. In Germany, new orders and industrial production also fell noticeably year-on-year, by -5.5% and -5.3% respectively.

Following the temporary end of the US-Chinese trade conflict, France and the EU returned to the focus of US trade policy. France announced the introduction of a digital tax, which would primarily affect the major US online retailers and providers of social media platforms and search services. As a result, the USA threatened to impose import duties of 100% on French goods worth USD 2.4 billion. In addition, US Trade Commissioner Lighthizer spoke of a very unbalanced relationship in trade relations between the US and the EU.

China, for its part, threatened Germany with punitive measures if Germany were to comply with the USA's request and fail to involve the largest Chinese mobile phone technology group in the construction of the German 5G network.

Note: All information published is for your information only and does not constitute investment advice or other recommendation. Long-term experience and awards do not guarantee investment success. Securities are subject to market-related price fluctuations which may not be compensated for by the active management of the asset manager or investment advisor. This information cannot replace a consultation. All information has been provided with care and to the best of our knowledge at the time of preparation. Despite all due care, the data may have changed in the meantime. Further information on opportunities and risks can be found on the website The sales prospectus and further information are available free of charge in German from DJE Investment S.A. or at The fund management company is DJE Investment S.A. DJE Kapital AG is the distribution agent.