HomeContributorsFundamental AnalysisTrump Says China Wants To Return To The Negotiating Table

Trump Says China Wants To Return To The Negotiating Table

Notes/Observations

  • Risk aversion off its worst level as President Trump says China reaching out to resume negotiations; risk aversion flows ebb a bit despite some push-back from Chinese officials.
  • Germany IFO Expectation Survey at a 10-year low and pointed to continued weakness in Q3

Asia:

  • China Vice Premier Liu He: China is willing to resolve trade dispute with US through calm negotiations; resolutely opposes trade war escalation; China has sufficient tools to ensure growth
  • China PBoC sets Yuan Reference Rate at 7.0570 vs. 7.0572 prior (Note: banks in China said to have been seen selling US dollars (USD) in order to support the yuan currency; the banks were said to sell USD near 7.1450)
  • US and Japan reach framework trade agreement; would pave the way for more US farm exports to Japan, while dropping the threat of increased US tariffs on Japanese cars.

Europe/Mideast:

  • EU said to consider softening debt reduction targets in rewriting of budget rule (Reminder: previously reported Italy’s Conte would ask the EU to review a rule that required member states to keep their budget deficit within 3% of GDP.
  • Italy 5-Star and PD parties said to be struggling to break deadlock over who could lead a new govt. Italy President Mattarella concerned about wasting time and if there’s no real progress by Monday evening then early elections would be the only way forward
  • Italy Dep PM Di Maio (5-Star) and Democratic Party (PD) officials said to be considering a possible new mandate for acting PM Conte. Antonio Misiani could replace Finance Minister Tria if Conte confirmed. Government set to ask for extension of deadline to name European commissioner
  • Italian acting Italian PM Conte said not to be interested in returning as PM
  • Germany govt document noted that the govt did not see a need for short term economic stimulus; Reiterates view that did not see a prolong recession in Germany but was forecasting a second consecutive quarter of contraction in Q3 (aka technical recession). Econ Min aimed to maintain balanced budget despite higher spending; believes there was room for growth stimulating measures without taking on additional debt
  • ECB’s Weidmann (Germany) stated that he did not see any current need for a major economic stimulus program
  • BOE Gov Carney reiterated stance that limited and gradual interest rate hikes would likely to be needed if there was a Brexit deal. Personal view was that after a no-deal Brexit it’s more likely to be appropriate to ease monetary policy than not He stated that the collective effect of the US/China trade dispute would have effect of about 1% lower US GDP growth. Spillover was starting to effect the UK economy and global confidence

Americas:

  • Treasury Sec Mnuchin: President Trump’s tweet depicting Fed Chair Powell as an enemy on a par with China was not meant to be taken literally. US was not facing a recession and the inverted yield curve reflected market expectations for a rate cut
  • President Trump: Would not stop Fed Chair Powell resigning if he offered to step down
  • US White House spokeswoman Grisham: Trump regretted not hiking the tariffs higher on China

Energy:

  • Iran Foreign Min Zarif met with France President Macron on the sidelines of the G7. The appearance by the Iranian official said to have surprised the US; France and Iran discussed ways to lessen the tensions between the US and Iran

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 -0.06% at 371.14, FTSE closed, DAX +0.16% at 11,630.52, CAC-40 +0.51% at 5,352.70, IBEX-35 +0.21% at 8,667.55, FTSE MIB +0.42% at 20,560.50, SMI -0.15% at 9,730.00, S&P 500 Futures +0.79%]

Market Focal Points/Key Themes:

Equities

  • European Indices rebounding sharply off the earlier lows and trade higher across the board, after promising US President Trump comments on trade dispute with China at G7 summit. UK stock exchange is closed today due to August’s bank holiday. S&P500 futures currently trade up 0.8%.
  • In relatively quiet session on the corporate front, shares of German residential property companies fall on new Berlin Govt’s plans for an Absolute Rent Ceiling. Deutsche Wohnen and Vonovia both trade lower, 3.5% and 2%, respectively.
  • On M&A front, Deutsche Bank and UBS do not confirm potential merger discussion, but do say they explored possibilities for banking alliance in Europe. Rayban sunglasses maker EssilorLuxottica trade 1.5% higher on press report hedge fund Third Point took a stake in company.
  • Looking ahead notable earners include OSI Systems, MOGU Inc. and iClick.
  • Consumer discretionary: EssilorLuxottica [EI.FR] +1.5% (stake)
  • Financials: Deutsche Bank [DBK.DE] +0.5%, UBS [UBSG.CH] -0.5% (examined banking alliance), Deutsche Wohnen [DWNI.DE] -3.5%, TAG Immobilien [TEG.DE] -1%, Vonovia [VNA.DE] -2% (Berlin Govt plans for rent ceiling)

Speakers

  • German IFO economists noted that there would be GDP stagnation in Q2 at most as industries are in recession and that services will follow
  • Russia Central Bank saw Q3 GDP growth between 0.8-1.3%
  • President Trump stated that the G7 that China has made two recent calls to US trade negotiators and wanted to come back to the negotiating table adding that China did not want to lose its supply chains. We would start shortly to negotiate, I think we would make a deal
  • China Foreign Ministry spokesperson Geng Shuang: not aware of US-China weekend phone calls. Reiterated that China would take more steps to protect its interests if US enacted the new tariffs
  • China PBoC said to urge banks to increase lending to small and medium sized companies (SMEs). Urged banks to use LPR as the main reference rate in loans and remove the implicit floor
  • Iran govt spokesperson: Iran had no interest in talks with US. Foreign Min Zarif trip to the G7 was for a package that France President Macron had discussed

Currencies/ Fixed Income

  • FX market saw continued volatility as focus remained on the global trade front.
  • USD/JPY hit fresh intraday highs towards the 106 area after President Trump’s commented from G7 that China had called US trade officials and asked for a resumption of trade talks. The volatility in the pair hit 8-month highs as global trade tension escalated late last week. USD/JPY hit fresh 2019 lows at 104.45 during the Asian session as safe-haven flows provided impetus to gun for the stop-loss orders that lurked below the 105 handle.
  • EUR/USD trying to hold above the 1.11 level after the Germany IFO Aug Expectation Survey hit a 10-year low and pointed to continued weakness in Q3. The Italian political situation remained fluid as PD and 5-Star continued to find ways in establishing common ground to create a coalition govt and avoid early elections

Economic Data

  • (FI) Finland July Preliminary Retail Sales Volume Y/Y: 1.7% v 4.7% prior
  • (ES) Spain July PPI M/M: +0.5 v -1.1% prior; Y/Y: -0.8% v -0.8% prior
  • (CZ) Czech Aug Consumer Confidence Index: 2.8 v 4.0 prior; Business Confidence: 12.5 v 11.5 prior, Composite Confidence (Consumer & Business): 10.5 v 10.0 prior
  • (TR) Turkey Aug Real Sector Confidence (Seasonally Adj): 102.1 v 96.6 prior; Real Sector Confidence NSA: 102.5 v 98.3 prior
  • (TR) Turkey Aug Capacity Utilization: 76.6% v 76.2% prior
  • (CH) Swiss Weekly Total Sight Deposits (CHF): 591.7B v 589.3B prior; Domestic Sight Deposits: 478.1B v 475.3B prior
  • (DE) Germany Aug IFO Business Climate Survey: 94.3 v 95.0e; Current Assessment Survey: 97.3 v 98.8e; Expectations Survey: 91.3 v 91.8e
  • (PL) Poland July Unemployment Rate: 5.2% v 5.2%e; Q2 Unemployment Rate: 3.2% v 3.9% prior
  • (HK) Hong Kong July Trade Balance (HKD): -32.2B v -48.2Be; Exports Y/Y: -5.7% v -8.2%e; Imports Y/Y: -8.7% v -8.3%e

Fixed Income Issuance

  • None seen

Looking Ahead

  • (RO) Romania July M3 Money Supply Y/Y: No est v 7.7% prior
  • 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
  • 06:00 (IL) Israel July Unemployment Rate: No est v 4.1% prior
  • 06:00 (RO) Romania to sell Bonds
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
  • 07:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:30 (US) July Preliminary Durable Goods Orders: 1.2%e v 1.9% prior; Durables Ex-transportation: 0.0%e v 1.0% prior; Capital Goods Orders (Non-defense/ex-aircraft): 0.0%e v 1.5% prior; Capital Goods Shipments (Non-defense/ex-aircraft): 0.1%e v 0.3% prior
  • 08:30 (US) July Chicago Fed National Activity Index: 0.00e v -0.02 prior
  • 09:00 (FR) France Debt Agency (AFT) to sell combined €3.6-4.8B in 3-month, 6-month, 9-month and 12-month Bills
  • 09:30 (BR) Brazil July Current Account Balance: -$6.0Be v -$2.9B prior; Foreign Direct Investment (FDI): 6.9Be v $2.2B prior
  • 10:30 (US) Aug Dallas Fed Manufacturing Activity: -4.5e v -6.3 prior
  • 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
  • (IT) Italy Debt Agency (Tesoro) announcement for BTP and CCTeu auction scheduled for Thurs, Aug 29th
  • 17:00 (KR) South Korea Aug Consumer Confidence: No est v 95.9 prior
  • 16:00 (US) Weekly Crop Progress Report
Trade The News
Trade The Newshttp://www.tradethenews.com/
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Featured Analysis

Learn Forex Trading