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China-US trade talk cancelled as Trump showed no sincerity and goodwill

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    ActionForex.com
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    Hong Kong’s South China Morning Post reported that it’s confirmed by unnamed source, China canceled the planned visit by Vice-Premier Liu He to the US on trade. This was on the ground that, as the Foreign Ministry said on Friday, “everything the US does hasn’t given any impression of sincerity and goodwill”.

    Further, Trump said in a rally in Missouri last Friday that “we have far more bullets … We’re going to go US$200 billion and 25 per cent Chinese made goods. And we will come back with more … If they retaliate, we have a lot more to come back with. And they want to make a deal, and let’s see if we can make a deal.”

    NAFTA talks to continue … informally, ahead of US imposed deadline

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      ActionForex.com
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      NAFTA talks will continue this week but only in informal way. Both Canadian Foreign Minister Chrystia Freeland and US Trade Representative Robert Lighthizer will be in United Nations General Assembly in New York on Monday and Tuesday. Canadian Prime Minister Justin Trudeau said “certainly the fact that many of our negotiators, many of our teams, will be in New York at the same time (means) it’s very likely that conversations continue in a constructive but less formal way.” There is no other formal arrangement known at this time.

      At the same time, Trudeau didn’t sound he would be obliged to the US-imposed deadline of October 1. He reiterated that he would not sign a bad NAFTA deal. And Canadian negotiation team won’t be rushed. On the other hand, White House economic adviser Kevin Hassett said on Friday that the US is getting “very, very close” to move forward on a trade deal with Mexico without Canada. Mexican president-elect Andres Manuel Lopez Obrador said on Friday that “in the event that the governments of the United States and Canada do not come to an agreement … we would have to maintain the bilateral deal with the United States and seek a similar deal with Canada.”

      Sterling dives as UK PM May delcares Brexit negotiation an impasse

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        ActionForex.com
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        Sterling tumbles broadly as UK Prime Minister Theresa May declares that the Brexit negotiation with the EU is “at an impasse”. And urged the nation to prepare for a no-deal scenario.

        May talked about the two options the EU has offered. She criticized the Norway way as “would make a mockery” of the Brexit referendum. And, the second one, a border in the Irish Sea was already rejected by the parliament. Further she said if EU thinks she’s going to budge on an Irish Sea border, they’re making a serious mistake.

        Additionally, May also criticized that there is no counter-proposal from the EU after rejecting her Chequers plan. While EU could say it has softened its stance on the Irish border, May said they cannot offer anything more generous.

        Clear reacitons are seen in Sterling pairs after May’s statement.

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        Into US session: Swiss Franc stays stronges, but dollar is having a comeback

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          ActionForex.com
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          Entering into US session, Swiss Franc is trading as the strongest one. It’s followed by Dollar as the second strongest as the greenback is trying to stage a rebound before weekly close. New Zealand Dollar is the third strongest. On the other hand, Sterling seems to be troubled by EU’s rejection of UK Prime Minister Theresa May’s Chequers Brexit proposals. It’s followed by Yen, which is the second weakest, on strong global risk appetite. Euro’s rally is losing some momentum after mixed PMI data.

          Major European stock indices extend this week’s rebound. At the time of writing, FTSE is up 0.89%, DAX up 0.42%, CAC up 0.65%. German 10 year bund yield is dropping back -0.0065, back at 0.465. Yesterday’s break of 0.5 handle was possibly a false dawn. Earlier today, Nikkei closed up 0.82%, Hong Kong HSI gained 2.50%. Singapore Strait Times rose 1.17%. China Shanghai SSE added 2.50% to 2797.48. 2800 handle is now within touching distance for the SSE.

          Nikkei’s rally is rather impressive this week, partly helped by the selloff in Yen. Immediate focus will be on 24129.34 high next week. Based on current upside acceleration, it’s likely that this handle is taken out firmly to resume the long term up trend.

          UK PM May bashed by British media for failure at EU summit

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            ActionForex.com
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            UK media generally bashed Prime Minister Theresa May’s performance at the informal EU summit in Austria. There are headlines today like “May humiliated,” “Humiliation for May,” “Embarrassing rebuff for PM in Salzburg,” “Your Brexit’s broken,”etc. It’s rather common for UK politicians to get the harshest words back at home. Comments from the EU were so far rather gentle.

            House Minister James Brokenshire defended her in a BBC radio interview, saying ” the prime minister is getting the right deal for our country. She is sticking up for Britain, sticking up what will work for country. These are tough negotiations.”

            However, Scottish First Minister Nicola Sturgeon said, “Now that the EU has explicitly rejected it, the Chequers pretence has to stop. At the very least, single market/customs union membership must be back on the table and the Article 50 clock stopped to avoid a cliff edge”.

            Separately, European Commission President Jean-Claude Juncker urge EU and UK to be like “two loving hedgehogs”. And, “when two hedgehogs hug each other, you have to be careful that there will be no scratches.”

            Eurozone PMIs: Slowdown limited to manufacturing.

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              ActionForex.com
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              Eurozone PMI manufacturing dropped to 53.3 in September, down from 54.4 and missed expectation of 54.5. That’s also the lowest reading in 28 months. PMI services rose to 54.7, up from 54.5 and beat expectation of 54.5. PMI composite dropped to 54.2, down from 54.5.

              Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

              “A near stagnation of exports contributed to one of the worst months for the Eurozone economy for almost two years. Trade wars, Brexit, waning global demand (notably in the auto industry), growing risk aversion, destocking and rising political uncertainty both within the Eurozone and further afield all fuelled the slowdown in business activity.

              “Thankfully, the slowdown was limited to manufacturing. A buoyant service sector, boosted in part by domestic demand being supported by strong job gains, means the survey data are running at a level indicative of the economy growing by a solid 0.5% in the third quarter.

              “However, with new orders and backlogs of work rising at much reduced rates compared to earlier in the year, export growth evaporating and future expectations remaining close to two-year lows, the risks to future growth appear tilted to the downside.”

              Full release here.

              German PMIs: Manufacturers’ confidence took a big hit

                By
                ActionForex.com
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                Germany PMI manufacturing dropped to 53.7 in September, down from 55.9 and missed expectation of 55.8. That’s also lowest in 25 months PMI services rose to 56.5, up from 55.0 and beat expectation of 55.1. PMI composite dropped to 55.3, down from 55.6 and hit 2-month low.

                Commenting on the flash PMI data, Phil Smith, Principal Economist at IHS Markit said:

                “The service sector was left to do most of the heavy lifting in September, as manufacturing put in its worst overall performance since August 2016. Service providers enjoyed the biggest boost to new business in over seven years in a further sign of strong domestic demand. Manufacturing new orders, however, were broadly flat as export sales declined for the first time in more than three years.

                “Manufacturers’ confidence took a big hit in September, deteriorating to its lowest for almost four years. Goods producers foresee output barely rising over the next 12 months and have cited growing uncertainty towards the outlook.

                “The September flash data meanwhile showed another solid gain in private sector employment, the one area where manufacturing and services both made strong positive contributions during the month. Falling backlogs of work in the manufacturing sector suggests that capacity may have finally caught up with demand, so there’s a good chance the pace of factory job creation will lose momentum in coming months.”

                Full release here.

                France PMI composite dropped to 53.6, 21-month low

                  By
                  ActionForex.com
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                  France PMI manufacturing dropped to 52.5 in September, down from 55.3, missed expectation of 53.3. {MI services dropped to 54.3, down from 55.4, missed expectation of 55.4. PMI composite dropped to 53.6, down from 54.9 and hit a 21-month low.

                  Commenting on the Flash PMI data, Sam Teague, Economist at IHS Markit said:

                  “Output growth across the French private sector slipped to its lowest since December 2016 during the latest survey period, with data indicating a broad-based slowdown across both the manufacturing and service sectors. Manufacturing businesses frequently reported a deterioration in the automotive sector. Moreover, the survey data saw a general slowdown in new business across the whole private sector, with growth reaching a near two-year low in September.

                  “Input price pressures sharpened at a faster pace in the latest survey, reflecting higher wage and fuel bills. Nonetheless, despite higher cost burdens, optimism among French businesses improved during September, evidenced by a further marked improvement in job creation.”

                  Full release here.

                  Canada demand US dropping auto tariff threats. It’s not a stupid nation

                    By
                    ActionForex.com
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                    A new deadlock emerged in Canada-US NAFTA negotiation as Canada demanded the withdrawal of auto tariff threat before making a deal. Canadian Foreign Minister Chrystia Freeland said “we discussed some tough issues today,” after meeting USTR Robert Lighthizer yesterday, without giving any details. Freeland also ignored the US imposed deadline of October 1 and insisted on getting a deal that was good for Canadians.

                    The request to drop auto tariffs threat based on national security is supported within the Canadian business world. Jerry Dias, president of Unifor, Canada’s largest private-sector union said “Why would Canada sign a trade agreement with the United States … and then have Donald Trump impose a 25 percent tariff on automobiles?” He added, “That for us is a deal breaker. It doesn’t make a stitch of sense. … We are a small nation, we’re not a stupid nation.”

                    Abe vs Trump, Motegi vs Lighthizer. Next week

                      By
                      ActionForex.com
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                      Japan Prime Minister Shinzo Abe, just newly re-elected ruling LDP leader, has confirmed a formal summit with Trump on September 26. The meeting will be held on the sidelines of Abe’s visit to New York to attend a United Nations General Assembly. Before that, Abe and Trump plan to have a dinner together on September 23.

                      In between, Japanese Economy Minister Toshimitsu Motegi will meet US Trade Representative Robert Lighthizer on September 24, as follow-up to their August meeting on trade. Motegi said “based on the common understanding we built in the first round of talks, we’ll seek a ‘win-win’ outcome that benefits both countries.” It’s a known that the US is forcing Japan into bilateral free trade agreement but Motegi said “I don’t think that will happen”.

                      Japan PMI manufacturing rose to 52.9, international trade tensions weigh on sentiments

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                        ActionForex.com
                        -

                        Japan PMI manufacturing rose to 52.9 in September, up from 52.5, but missed expectation of 53.1. Markit noted that input cost inflation accelerated at the fastest pace since March 2011. Also, geopolitical tensions weigh on sentiment, with Future Output Index dipping further.

                        Joe Hayes, Economist at IHS Markit, said “manufacturing sector business cycle continued along its upward path”. Also, “business conditions remained robust despite a number of natural disasters over the past month.” “Recent demand pressures have been primarily driven by the domestic market, latest flash data pointed to the first rise in export sales since May amid ongoing global trade frictions.” However, “business sentiment dipped further in September to a 22-month low as firms remain uncertain to how international trade tensions could impact the Japanese economy”.

                        Full release here.

                        Japan core CPI ticked up to 0.9% yoy, core-core sluggish at 0.4% yoy

                          By
                          ActionForex.com
                          -

                          Japan all item CPI rose 0.5% mom 1.3% yoy in August. Core CPI (ex-fresh food) rose 0.3% mom, 0.9% yoy. Core-core CPI (ex-fresh food and energy) rose 0.2% mom, 0.4% yoy. While core CPI ticked up from 0.8% yoy in July, it’s still way off BoJ’s target of 2%. More importantly, the core-core continued to show sluggishness in underlying inflation.

                          Full release here.

                          Mid-US update: US stocks make record high, Dollar at critical juncture after steep selloff

                            By
                            ActionForex.com
                            -

                            Dollar suffers steep selling today but it’s trying to regain some ground at mid-US session. Currently it’s trading as the second weakest currency, together with Canadian Dollar. Yen is the worst performing one as fresh selling is seen in US session even against Dollar. On the other hand, New Zealand Dollar was boosted by strongest quarterly GDP growth in two years and is the strongest one. Sterling was lifted by strong retail sales data even though there is no breakthrough in Brexit negotiation in the informal EU summit. Euro follows as the third strongest as German 10 year bund yield once breached 0.50%. But it’s now back at 0.47, thus limiting the strength of Euro.

                            In other markets, DOW and S&P 500 make record highs today while NASDAQ lags behind. US treasury yield is having a notable pull back after this week’s strong rally. It remains to be seen if 10 year yield could eventually breaks 3.115 key resistance. Major European indices ended in black with FTSE up 0.49%, DAX up 0.88% and CAC even stronger and up 1.07%. Gold is back above 1200 but struggles to ride on Dollar selloff to push through 1214.30 resistance.

                            An important point to note is that Dollar is now at a rather critical juncture. EUR/USD is pressing 38.2% retracement of 1.2555 to 1.1300 at 1.1779. GBP/USD is also in proximity to 38.2% retracement of 1.4376 to 1.2661 at 1.3316. We’ve pointed out before that 1.1300 in EUR/USD and 1.2661 in GBP/USD are both medium term bottoms, considering bullish convergence condition in daily MACD. Subsequent rebounds are viewed as corrective in nature.

                            Ideally, we should see strong resistance from 1.1779 and 1.3316 fibonacci level to limit upside, at least on first attempts. This will firmly keep medium term outlook bearish. And then based on the structure of the subsequent fall, we could be able to the possible depth of the next down moves. However, firm break of these two fibonacci levels would open up the cases of trend reversals. Even though the chance of bullish reversal in the pair is still slim in that case, technical forecasts would become more difficult.

                            DOW hit record high, extends decade long up trend

                              By
                              ActionForex.com
                              -

                              DOW surges sharply in early US session and finally catches up with S&P 500 in making new record highs. S&P 500 is also strong, gapping up and hit record high too. NASDAQ on the other hand, lags behind even though it’s also trading in black.

                              DOW’s break of 26616.71 indicates resumption of the long term up trend. Such up trend didn’t start last year, but way back at 6469.95 in 2009. The record run has indeed started in early 2013 when the US economy has finally come out of thew worst global financial crisis since the WWII, with all the hard work by the government back then and Fed.

                              Anyway, technically, the next medium term target for DOW is 38.2% projection of 15450.56 to 26616.71 from 23997.21 at 28262.67. It’s too early to tell if DOW could get through this level given that it’s so late in the cycle. We’ll see.

                              OECD downgrades global outlook, trade tensions are starting to bite

                                By
                                ActionForex.com
                                -

                                In its interim economic outlook, OECD downgraded global growth forecast for 2018 and 2019. More importantly, almost all countries covered were downgraded, in either year or both, except Australia, Japan, China, Russia and Saudi Arabia. OECD warned that “escalating trade tensions, tightening financial conditions in emerging markets and political risks could further undermine strong and sustainable medium-term growth worldwide.

                                OECD Chief Economist Laurence Boone:

                                • Trade tensions are starting to bite, and are already having adverse effects on confidence and investment plans.
                                • Trade growth has stalled, restrictions are having marked sectoral effects and the level of uncertainty on trade stances remains high.
                                • It is urgent for countries to end the slide towards further protectionism, reinforce the global rules‑based international trade system and boost international dialogue, which will provide business with the confidence to invest
                                • With tighter financial conditions  creating stress on a number of emerging economies, especially Turkey and Argentina, a strong and stable policy framework will be key to avoid further turbulence.

                                Full pre-release here.

                                UK PM May insists Chequers plan is the only Brexit proposal on the table

                                  By
                                  ActionForex.com
                                  -

                                  After meeting with her EU counter parts in Austria, UK Prime Minister Theresa May insisted that her Chequers plan is the only Brexit proposal that’s on the table.

                                  She said, “there is no counter proposal on the table at the moment that actually deals, delivers on what we need to do and respects the integrity of the United Kingdom and respects the result of the referendum,”

                                  Separately, it’s reported that UK Finance Minister Philip Hammond has urged urged the European Commission to work with UK together on preparation of no-deal Brexit to reduce or avoid disruption to the financial sector.

                                  EU Tusk: Chequers Brexit proposal will not work. Oct the moment of turth

                                    By
                                    ActionForex.com
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                                    European Council President Donald Tusk said after meeting between EU leaders that “everybody shared the view that while there are positive elements in the Chequers proposal, the suggested framework for economic cooperation will not work, not least because it risks undermining the single market.”

                                    And, he added “the moment of truth for Brexit negotiations will be the October European Council. In October we expect maximum progress and results in the Brexit talks.”

                                    Separately, UK Foreign Minister Jeremy Hunt said “we are confident if we can get the support of the European Union, ultimately it would get through parliament.” Also, “people will be very angry indeed if we had a second referendum and it’s certainly not the government’s policy.”

                                    US initial jobless claims dropped to 201k, Philly Fed business outlook rose to 22.9

                                      By
                                      ActionForex.com
                                      -

                                      US initial jobless claims dropped -3k to 201k in the week ended September 15, below expectation of 210k. It’s also the lowest level since November 15, 1969, when it was 197k. The four week moving average of initial claims dropped -2.25k to 205.75k, lowest since December 6, 1969.

                                      Continuing claims dropped -55k to 1.645m in the week ended September 8. It’s the lowest level since August 4, 1973. Four-week moving average of continuing claims dropped -20.75k to 1.6915m, lowest since November 17, 1973.

                                      Philly Fed business outlook diffusion index for current general activity rose 11 pts to 22.9 in August. , above expectation of 16.3. Six-month indicator dropped to 36.3, down from 38.8.

                                      Into US session: Dollar in free fall as German 10 yield bund yield breaks 0.5%

                                        By
                                        ActionForex.com
                                        -

                                        Entering into US session. Dollar suffers a fresh round of selling against European majors in particular. It’s unsure what’s the exact reason that drives the greenback down, together with Yen. Could it be Trump’s rant that his border wall is excluded from the spending of the Republican-led Congress?

                                        Well, jokes aside, German 10 year bund yield’s surge through 0.5% is likely the reason. It is currently up 0.011 at 0.501.

                                        For now, Sterling remains the strongest one for today as helped by much stronger than retail sales. Additional support is given by positive words from EU leaders on Brexit agreement. At least, they’re working towards a deal rather than away from it. New Zealand is trading as the third strongest one. It’s second place was taken by Euro.

                                        In other markets, European stock indices are strong with CAC leading the way up by 0.81%, DAX by 0.51% and FTSE by 0.16%.  Earlier today, Asian markets were firm with Nikkei up 0.01%, Hong Kong HSI up 0.26%, Singapore Strait Times up 0.12%. China SSE closed slightly down by -0.06%.

                                        SNB expected to stand pat through 2020 after lowering inflation forecasts

                                          By
                                          ActionForex.com
                                          -

                                          SNB lowered inflation forecast in 2019 by 0.1% to 0.8% today.  For 2020, inflation is projected to be at 1.2%, sharply lower than prior forecast of 1.6%. Some economists take that signals that SNB will wait a long time to change its monetary policy. And the first rate hike could be postponed towards 2020. That is, SNB could wait some more time after ECB starting to raise interest rates beyond summer 2019.

                                          SNB Chairman Thomas Jordan told reports that “the franc has appreciated, which has also led to a tightening of monetary conditions.” And, “that is also the main reason why our monetary policy must remain expansive.”

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