China slips towards dictatorship
According to new flow the ruling Chinese Communist Party will move to allow President Xi Jinping to stay in power ad infinitum. A next month’s annual session the counties parliaments the National People Congress projected to pass the proposed amendment. This act will shift the 1982 constitution, which limited the President’s term to two five-year terms in office. The government of China holds no competitive elections for leadership positions and body responsible for decision on Presidential term and constitutional amendments generally rubberstamps the party’s agenda. While limiting personal freedom and increasing the likelihood of authoritarian state cannot be a positive for humanity. However, safeguarding some degree of political stability provides comfort for investors.
President Xi Jinping extending his rule doesn’t come without political risk. Centralizing power make Xi solely responsible for results. However, limited red tape means he can focus on ballooning public debt, nonexistent welfare system, rebalancing from export to consumer led growth, and geopolitical diplomacy.
Core to your investment story based partially on China’s protectionist behavior around key domestic companies. Consolidation of power by President Xi Jinping support this theme. Elsewhere, US President Trump is expected to slap global tariffs on US steel and aluminum imports sometime this week. While affecting other nations China will be impacted. Some would say China is Trumps primary target. This shotgun trade policy is unlikely to be well received by an all-powerful Xi.
Draghi Speech gives comfort to investors
Draghi held a positive tone yesterday, reassuring investors that inflation is underway as growth continues to take effect. Draghi also mentioned that further increase in employment (published in March 14th 2018) and a pickup in wage growth will support consumer-price growth. February Consumer Price Index Estimate Y/Y published on Wednesday will most probably remain below the 2% target (estimated at 1.50%). An additional impediment for monetary policy authorities is the recent weakening correlation between growth and inflation that renders tackling inflation target much more challenging.
European markets remained solid after the announcement, the Euro Stoxx 50 rose at 3’463 points (+0.63%), supported by Consumer Staples (+1.59%), Information Technology (1.21%), Health Care (+0.92%) and Materials (+0.68%), all sectors remaining green. Major European markets also closed in positive figures (FTSE 100: +0.62%, DAX: +0.35%, CAC40: +0.51%, Ibex 35: +0.81%, FTSE MIB: +0.15% and SMI: +0.87%). Eurozone Government yields remained stable, currently valued at 0.658% (10-year) and -0.535% (2-year).
