Chief economist update: Good news is good news

It's beginning to look a lot like Christmas has come early ... and Thanksgiving too.

Wall Street benchmark equity indices rallied at the close of trading last week: The S&P 500 added 1.0% to a new all-time high; the Nasdaq closed 1.1% up but not after setting a fresh record level; the Dow jumped by 1.1%; and, the Russell 2000 index soared by 1.7%.

"There's a reason
For the sunshine day
There's a reason
Why I'm feelin' so high..."

- Bellamy Brothers

There's good news all around it seems.

The US and China have reportedly reached a consensus (in principle) over their latest trade negotiations. Not holding my breath given historical precedence of talk breakdowns but hoping for the best.

The US labour market remains robust with the economy adding 128,000 jobs in October, way more than consensus expectations for just an 89,000 gain and the unemployment rate remained near September's 50-year low of 3.5% in September to 3.6% last month.

These positive reports came just two days after the US Federal Reserve cut interest rates down another 25 basis points to 1.5%-1.75% on October 30 (the third in as many FOMC meetings - July and September).

And China appears to be getting back up too.

The Caixin China manufacturing PMI rose from 51.4 in September to 51.7% in October. No big deal given the quantum of increase but a big one given that it marks the strongest reading since February 2017 and is better than market expectations for a dip to 51.0.

Not only that, commenting on the China General Manufacturing PMI data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: "Both domestic and foreign demand improved substantially. The subindex for new orders stayed in positive territory and rose to the highest level since January 2013."

The recent strengthening growth conditions in both the US and China comes despite their on-going trade friction.

A lasting de-escalation of trade tensions would have a positive domino effect and lift growth around the world that, in turn, would allow central banks to resume policy normalisation instead of dreaming of new unconventional monetary policy measures.

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