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U.S. Trade deficit and Venezuelan Oil


The U.S. trading edged lower as investors digested Donald Trump’s second State of the Union address. Investors’ were, among other things, looking at the chances of another government shutdown happening. The major indices did not change much with the S&P 500 and Dow jones moving to the negative side by 0.22% and 0.08% respectively. The largest gainers for the day where semiconductor companies where the U.S. semiconductors Index rose by 2.09%.

European stocks had a mixed day on Wednesday with the major indices closing in opposite direction just Stoxx 600 closing just above the flat line while the DAX, CAC 40 and FTSE closed just below it. The European technology stocks were the largest gainers following earnings news from Hexagon and Dassault Systemes. The two stocks jumped 8.5% and 9.6% respectively. The U.K.’s CYBG rose 14% following reporting that lending increased during the first quarter of 2019. On the regulatory side, the EU rejected a proposal for a merger between the Siemens and Alstom. The deal between the two giants was rejected because of “serious competition” concerns.

It was a quiet day on the Malta Stock Exchange as the MSE equity price index was up 0.222% following a rebound from HSBC of 1.7%. Most other entities traded unchanged while the only loser was Maltapost shedding 2.3% to close at €1.25.

U.S. trade deficit decline

The U.S deficit fell during November following five months of constant increases. The decline in the shortfall with China helped the U.S. decrease the trade deficit to $49.3 for the month. The current U.S. administration has been targeting this for a while by levying tariffs and it looks like it has started to show some results. Both exports and imports declined however the former declined more than the latter.

This drop poses good prospects for the fourth-quarter GDP and employment numbers. Nevertheless trade is still a big question mark given the current relationship between the U.S. and China as well as other trade partners.

Chris Ruperky, the chief financial officer at MUFG stated, “America’s trade fight with the world has finally started to slow global trade and only time will tell whether this is a good thing for the economy in the long run” while Steve Mnuchin said that the trade discussions with China had been very productive.

Venezuela oil financing

Venezuela’s opposition announced the opening of a US fund with the purpose to hold oil income. This is considered by many to be a key step to ousting President Maduro from power. The fund will start receiving income from PDVSA and Citgo Petroleum Corp. The income from last month onwards will be going into this fund. This was also the period when president Trump recognized the opposition leader as the legitimate interim president.

Citgo, a Venezuelan owned US refiner, has been facing though time following the US attempts to try to take it away from Maduro’s control. The fund is just the latest move after Trump imposed sanctions on Venezuela’s oil industry.

This news has significant implications on oil prices as Venezuela sits on the largest oil reserves in the world. As of now there has not been a significant impact on prices due to Venezula’s low output however if there is political stability in the country, one would expect the output to grow putting downward pressure on oil prices. Today WTI crude sits around the $53.72 mark.