High-level US-China trade talks to resume next week, aiming at a deal in April

    It’s reported, without confirmation from named officials, that high-level US-China trade talk are going to resume week in a push to close the deal by the end of April. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin would fly to Beijing in the week of March 25 to meet Chinese Vice Premier Liu He again. The following week, Liu He is expected to fly to Washington to continue the negotiations.

    At the same time, it’s reported that China is pushing back against some of the American demands on core issues. A key reason is the lack of assurance from Trump on lifting tariffs imposed. China is also said to be stepping back from the initial agreements over pharmaceutical data protection, patent linkages and refused to give ground on data-service issues. Nevertheless, some officials on both sides are seeing the “back-and-froth” as something expected in typical negotiations.

    The date for signing a trade deal between the countries has been pushed back recently. While it’s still possible to happen in April, the more probable occasion would be as sideline of G20 summit in Japan in June. Meanwhile, in his typical rhetorics, Trump said at the White House yesterday that “talks with China are going very well”.

    EU Barnier: Concrete plan needed to asssess reason and usefulness of Brexit extension

      EU chief Brexit negotiator Michel Barnier demands concrete plan from the UK so that EU leaders can make a decision on approving an extension.

      He said “Does an extension increase the chances of ratification of Withdrawal Agreement? What would be the purpose and outcome? How can we ensure that, at the end of a possible extension, we are not back in the same situation as today?”

      “If Theresa May requests an extension before the European Council on Thursday, it will be for the 27 leaders to assess the reason and usefulness… EU leaders will need a concrete plan from the UK in order to be able to make an informed decision,” he added.

      EU Katainen: Trump’s selfishness approach on trade is not sustainable

        European Commission Vice President Jyrki Katainen criticized that the “selfish” approach of Trump’s to trade is not sustainable. And he emphasized to maintain rule-base trade with WTO reforms.

        Katainen said “Japan, China and the EU are willing to reform the WTO, the U.S. has not been that interested, but they are willing to cooperate: He added: “Even though the U.S. authorities may think that selfishness is better than cooperation, it is not a sustainable way of thinking. We need better, rules-based trade in the future where the international community sets the rules”.

        On trade negotiation with the US, he said “there are discussions going on on several levels and … we can end up having some sort of an agreement with the U.S. on trade, but let’s not go deeper than this”. He emphasized “it is too early to say that our trade discussions are doomed to fail.”

        EU Tusk and Irish Varadkar await proposals, UK May to seek Brexit extension

          European Council President Donald Tusk met Irish Taoiseach Leo Varadkar in Dublin today to “confirm full EU unity on Brexit”. After that they issued a joint statement emphasizing that “we must now see what proposals emerge from London” in advance of the summit in Brussels on Thursday. Also, they noted “preparations continue in Ireland and across the European Union for a no deal scenario, which would have serious consequences for all concerned.

          Meanwhile, UK Prime Minister Theresa May’s spokesman said she is going to writing a letter to Tusk asking for Brexit delay. But it’s not clear that how long a delay she’d seek. Some Eurosceptics in May’s Cabinet emphasized that that they’re rather leave without a deal than have a long Article 50 extension. But there seems to be no agreement in the Cabinet meeting yet.

          Into US session: Sterling up without conviction, positive European data ignored

            Entering into US session, the forex markets remain rather directionless at this point. Sterling is lifted mildly by talks that EU is going to offer UK a conditional Brexit extension in the summit later this week. With that change in circumstance, Prime Minister Theresa May could bring her deal back to the Commons for another meaningful vote. But still, upside in the Pound is very limited as there is no clear path to what’s next on Brexit.

            Data from Europe are positive with unemployment rate in UK hitting 44-year low at 3.9%. Wage growth also maintained strongest pace German ZEW Economic Sentiment also showed significant improvement. But the data are largely ignored. WTI crude oil is extending recent rally to 59.80 so far and it’s now sitting inside key resistance zone around 60. Oil price is giving Canadian Dollar a mild lift.

            In Europe:

            • FTSE is up 0.52%.
            • DAX is up 0.89%.
            • CAC is up 0.46%.
            • German 10-year yield is up 0.010 at 0.98. It breached 0.1 handle to 0.101 earlier today.

            Earlier in Asia:

            • Nikkei dropped -0.08%.
            • Hong Kong HSI rose 0.19%.
            • China Shanghai SSE dropped -0.18%
            • Singapore Strait Times rose 0.25%.
            • Japan 10-year yield dropped -0.008 to -0.044.

            EU officials give strong warnings to UK for clarity and purpose for Brexit extension

              The Brexit chaos in the UK drew some strong reactions from EU. Germany’s Europe Minister Michael Roth warned that “our patience as the European Union is being sorely tested at the moment.” He added “I can only call once again on our British partners in London to make concrete proposals at last on why they want an extension.”

              French EU affairs minister Nathalie Loiseau also complained that “this uncertainty is unacceptable”. She added: “We need an initiative, we need something new because if it’s an extension to remain in the same deadlock… How do we get out of this deadlock? – this is a question for the British authorities.” Also, “Grant an extension – what for? Time is not a solution, it’s a method. If there is an objective and a strategy and it has to come from London.”

              Separately, ITV political editor Robert Preston reported tat EU leaders are unlikely to grant a Brexit delay this week. Instead, they will request clarify from UK Prime Minister Theresa May on what the delay is for.

              German ZEW improved significantly as major risks considered less dramatic

                German ZEW Economic Sentiment improved notably to -3.6 in March, up from -13.4 and beat expectation of -11.0. German ZEW Current Situation, however dropped to 11.1, down from 15.0 and missed expectation of 13.0. Eurozone ZEW Economic Sentiment improved to -2.5, up from -16.6 and beat expectation of -15.1. Eurozone ZEW Current Situation also dropped to -6.6, down from -3.0.

                ZEW President Professor Achim Wambach said in release that the significant improvement shows that “major economic risks are considered to be less dramatic than before”. Those include possible delay in Brexit and renewed hope for a deal. Also, “progress made in the negotiations between China and the US to end the trade war between the two nations may also have contributed”. Still the indicators point to “relatively weak growth” in first half in Germany.

                Full release here.

                UK unemployment rate dropped to 3.9%, wage growth solid at 3.4%

                  UK unemployment rate dropped to 3.9% in the three months to January, down from 4.0% and beat expectation of 4.0%. That’s also the lowest level since the period between November 1974 to January 1975. For men, unemployment rate dropped to 4.0%, lowest since 1975. For women, unemployment rate dropped to 3.8%, lowest since 1971.

                  Average weekly earnings including bonus rose 3.4% yoy, unchanged from December and beat expectation of 3.2% yoy. Average weekly earnings excluding bonus rose 3.4% yoy, down from December’s 3.5% and matched expectations. Also release, jobless claims rose 27.9k in February, above expectation of 13.1k.

                  Full release here.

                  Barclay: Moment of crisis for UK but Bercow pointed to possible solutions already

                    UK Brexit Minister Stephen Barclay warned that this is a “moment of crisis” for the country after Commons Speaker John Bercow “raised the bar” for another Brexit vote on the same deal. And it’s “more unlikely” for the meaningful vote to take place this week.

                    Nevertheless, Barclay also pointed out that Bercow already “pointed to possible solutions”. And Barclay added “you can have the same motion but where the circumstances have changed.” Also, Barclay noted “the speaker himself has said that where the will of the House is for a certain course of action, then it is important that the will of the House is respected.” He added that both an extension or a shift in support, could indicate a change in context.

                    But Barclay rejected the option of asking the Queen to cut short the entire parliamentary session, known as prorogation, He said “the one thing everyone would agree on is that involving Her Majesty in any of the issues around Brexit is not the way forward, so I don’t see that a realistic option.”

                    RBA awaits more data to resolve tensions in domestic data

                      In the March meeting minutes, RBA noted the “tension” between ongoing improvement in job data and slowdown in output growth in H2 2018. Leading indicators pointed to further tightening in the job market and wages growth picked up in Q4. Growth slowed but business and public spending remained positive. However, there continued to be “considerable uncertainty” around consumption outlook, given fall in house prices.

                      Taken into account the available information, RBA judged that current monetary policy stance was “supporting jobs growth and a gradual lift in inflation”. But “significant uncertainties around the forecasts remained”. The scenarios of a rate hike and rate hike were “more evenly balanced” than over the preceding year. And, “it would be appropriate to hold the cash rate steady while new information became available that could help resolve the current tensions in the domestic economic data.”

                      Full minutes here.

                      Australia house price dropped -2.4% qoq, -5.1% yoy in Q4

                        Australia house price index dropped -2.4% qoq in Q4, deepened from Q3’s -1.5% qoq and missed expectation of -2.0% qoq. Sydney led the way by dropped -3.7% qoq, followed by Melbourne at -2.4%. Hobart (up 0.7%) and Adelaide (up 0.1%) bucked the trend.

                        Through the year growth in residential property prices fell -5.1% yoy in the December quarter 2018. Falls were recorded in Sydney (-7.8 per cent), Melbourne (-6.4% yoy), Darwin (-3.5% yoy), Perth (-2.5% yoy) and Brisbane (-0.3% yoy).

                        Chief Economist for the ABS, Bruce Hockman said: “While property prices are falling in most capital cities, a tightening in credit supply and reduced demand from investors and owner occupiers have had a more pronounced effect on the larger property markets of Sydney and Melbourne.”

                        Full release here.

                        Sterling clueless on Brexit chaos

                          Sterling recovers broadly today after knee-jerk reactions to new Brexit chaos overnight. But overall, the Pound is probably as clueless as the UK government on what’s next. Commons Speaker John Bercow invoked a rule to forbid Prime Minister Theresa May to bring back the same Brexit deal for another meaningful vote, unless there are substantial changes in the proposition. The 415-year-old Parliamentary convention is for “sensible use of the House’s time and proper respect for the decisions that it takes”. Without being forewarned, the government just said: “We note the speaker’s statement. This is something that requires proper consideration”, without further elaboration.

                          Now, it’s near impossible for a Brexit deal to be passed this week and hence, Article 50 extensions won’t be a short one. The Sun newspaper reported that May is drafting a letter to European Council President Donald Tusk to request a delay of 9 to 12 months. Some suggested one way to bring back the Brexit deal for another vote is having EU granting another Brexit date than March 29, thus, making the proposition substantially different. Another way is to end the current parliamentary session early without dissolving it, and start a new session. The same deal could then be voted for in “another” session.

                          But then, the fundamental question is not solved. That is, is there enough votes to the current Brexit deal through?

                          Here is Bercow’s statement.

                          Sterling tumbles as Commons Speaker Bercow rules out another vote for the same Brexit deal

                            Sterling is apparently troubled by more Brexit chaos and weakens broadly. Firstly, ITV’s Robert Peston said it’s almost 100% certain that the UK government cannot make a deal with Northern Ireland DUP, and thus there will be no meaningful vote three (MV3) this week.

                            But more importantly, the Common speaker John Becrow just made a surprising statement in the Parliament. Simply speaking, Prime Minister Theresa May cannot bring the “same” motion, the Brexit deal that was defeated just last Tuesday, back for another meaningful vote.

                            That is, the same motion, or essentially the same motion, cannot be voted over and over again. This is a necessary rule to ensure the sensible use of the house’s time, and proper respect for what it decides.

                            Key quotes from John Bercow’s opening statement:

                            “If the government wishes to bring forward a new proposition that is neither the same nor substantially the same as that disposed of by the House on March 12, this would be entirely in order.

                            What the government cannot legitimately do is resubmit to the house the same proposition – or substantially the same proposition – as that of last week, which was rejected by 149 votes.

                            This ruling should not be regarded as my last word on the subject. It is simply meant to indicate the test which the government must meet in order for me to rule that a third meaningful vote can legitimately be held in this parliamentary session.”

                            WTI crude oil extends uptrend to take on 60 key resistance

                              WTI crude oil’s rally resumes today and reaches as high as 59.46 so far. It’s now very close to key resistance zone around 60 psychological level. There are also 50% retracement of 77.06 to 42.05 at 59.55 and 55 week EMA at 59.25. For now, we do not expect a firm break of this 59.25/60.00 resistance zone. Bearish divergence condition in 4 hour MACD should also limit upside momentum. Break of 57.96 will indicate short term topping and bring pull back to 54.72 support. However, sustained break of 60 will pave the way to 61.8% retracement at 63.68 next.

                              US NAHB housing index unchanged at 62, anticipate solid spring season

                                US NAHB housing market index is unchanged at 62 in March, missed expectation of 63. NAHB noted that “builders report the market is stabilizing following the slowdown at the end of 2018 and they anticipate a solid spring home buying season”.

                                And, “in a healthy sign for the housing market, more builders are saying that lower price points are selling well, and this was reflected in the government’s new home sales report released last week.”

                                Full release here.

                                German FM Scholz : Some richer countries only think of their own interest

                                  German Finance Minister Olaf Scholz warned in at the World Policy Forum in Berlin that trade conflicts are damaging the world. Without naming any country, he singled out “richer countries” who only think of their own interest. At the same time, he also urged Europe to have one voice to have more bargaining power.

                                  Scholz said “trade conflicts, as we have seen over the last months – especially between richer countries only thinking of their own interest – are damaging the world economy”. He added that “trade policy has been an EU-level responsibility for a long time”. And, “it is obvious that we have much more bargaining power if we speak with one European voice… only together we are able to set and enforce standards of fair trade.”

                                  Into US session: AUD maintains gains on strong Chinese stocks, GBP turns weak

                                    Entering into US session, Australian Dollar remains the strongest one, followed by New Zealand Dollar. Strength in Chinese stocks gave the Aussie a solid boost as Shanghai SSE rose 2.47% to 3096.42, just a touch below 3100 handle. Sterling is the weakest one so far, suffering some brief selloff in European session. Brexit hardliner Rees-Mogg indicated that he might back PM May’s Brexit deal as a bad deal is better than no-Brexit. But at this point, it’s unsure whether the government will have enough support to make tomorrow’s meaningful vote “meaningful”. Dollar and Yen follow as the next weakest.

                                    In Europe:

                                    • FTSE is up 0.59%.
                                    • DAX is down -0.15%.
                                    • CAC is up 0.01%.
                                    • German 10-year yield is up 0.008 at 0.093, getting close to 0.1 handle again.

                                    Earlier in Asia:

                                    • Nikkei rose 0.62%.
                                    • Hong Kong HSI rose 1.37%.
                                    • China Shanghai SSE rose 2.47%.
                                    • Singapore Strait Times rose 0.40%.
                                    • Japan 10-year JGB yield rose 0.002 to -0.035.

                                    Bundesbank: German growth subdued in Q1 as consumption offset by weak manufacturing

                                      Bundesbank said in the monthly report that German economic growth remained subdued in Q1. The main reasons include weak industrial production, falling auto exports and deteriorating manufacturing sentiment. Manufacturing sector would drag down overall economic performance for the third straight quarter.

                                      On the other hand, construction and private consumption should provide support to the economy. Employment also continues to rise despite slowdown. Bundesbank added that private consumption could pickup significantly as signaled by strong increase in retail sales.

                                      Full report in German.

                                      Brexiteer Rees-Mogg hints he might back May’s deal, as it’s better than no Brexit

                                        One of the most influential Brexiteer hinted today that the might back Prime Minister Theresa May’s Brexit deal because a bad deal is better than no Brexit. Rees-Mogg, chairman of the European Research Group told LBC Radio that “no deal is better than a bad deal but a bad deal is better than remaining in the European Union in the hierarchy of deals.”

                                        Mogg warned that “a two-year extension is basically remaining in the European Union.” But he also noted: “The question people like me will ultimately have to answer is: can we get to no-deal instead? If we can get to no-deal instead, that is a better option… but I am concerned the prime minister is determined to stop a no-deal.”

                                        Separately, Foreign Minister Jeremy Hunt said there were “cautious signs of encourage” regarding May’s deal. And the government would “hope” to have another meaningful vote tomorrow. But he emphasized “we need to be comfortable that we’ll have the numbers”. Hunt of said “the risk of no-deal, at least as far as the UK parliament is concerned, has receded somewhat but the risk of Brexit paralysis has not.”

                                        EU to seek China agreement to open up market in upcoming summit

                                          Reuters reported that EU is seeking China’s agreement to open up its market by summer 2019. An EU drafted six-page joint communique obtained reads China and the EU will “agree by summer 2019 on a set of priority market access barriers and requirements facing their operators.” It’s intended to be the deliverable of the EU-China summit on April 9 in Brussels. Chinese Premier Li Keqian is expected to be there, meeting European Commission President Jean-Claude Juncker and European Council President Donald Tusk.

                                          While there is no other detail reported, we believed it’s released to the proposed 10 actions by the European Commission on relations with China release last week. The proposal will be discussed and endorsed at the European Council meeting this week on March 21. There, EU described China as a “cooperation partner” and “negotiating partner” as well as “systemic rival promoting alternative models of governance.” Some important actions focus on issues like subsidies and forced technology transfers, reciprocity and open up procurement opportunities in China.