China’s Global Times warns of downtrend in US-China trade – difficult to reverse

China’s Global Times warns of downtrend in US-China trade – difficult to reverse

The Global Times is forthright with its views, a good window into China sentiment 

Latest piece:

  • It has been 18 months since the US began imposing 25 percent tariffs on the first tranche of Chinese goods, and bilateral trade between the world’s two largest economies is still sliding. 
  • Even with a “phase one” trade deal, the downtrend in bilateral trade will be difficult to reverse. 
  • Meanwhile, China’s total trade actually expanded 2.4 percent year-on-year in the first 11 months, indicating that trade with the US is not irreplaceable for China. 

Bolding mine.

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Citi says it remains cautious on an ‘eventual’ US-China trade deal

A weekend note via Citi on the conclusion of US-China talks on Friday.

  • Says the result is a ‘down payment’ that is ‘to keep discussion going’
  • ‘despite what has been achieved … we remain cautious on an eventual trade deal’.

State media in China is a bit more upbeat, says ‘substantial progress’ was made. But no deal. 

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Trump relents on tariffs, Huawei as US-China trade talks set for a revival

What to look out for when markets open next week?

Trump

Trump and Xi once again managed to use their affinity to help strike a compromise in getting trade talks back under way earlier today.

Of note, Trump said that the US will not be levying new tariffs against China while also allowing for Huawei to purchase equipment from US companies – saying that he and Xi have agred to leave the “complicated” Huawei issue until the end of what appears to be an open-ended trade truce between the two countries.

Although Trump relented on his stance, he didn’t give any firm commitment on whether or not Huawei will be pulled from the entity list and says that the Commerce Department will meet in the coming days to review what products can be sold to Huawei.

I reckon the very notion of trade talks being revived is likely to give markets a bit of a relief on Monday even though much of this has already been anticipated. The key now will be to measure whether or not this optimism can last the course as negotiations are set to continue in the coming weeks/months.

Besides that, just be on the look out for any official statement release by both the US and Chinese camps when markets open next week. So far, China has said that they hope that Trump will deliver on the Huawei issue but didn’t really elaborate on any details pertaining to what other details both sides will be discussing in future negotiations.

As for any official statements, the interpretation of the language will be key. There’s no doubt China will be the more cautious and less upbeat of the two in building up market optimism after the recent setback in trade talks in May but we’ll see.

For now, I reckon the ‘back on track’ sentiment should lend risk assets a tailwind in the opening sessions next week with the moves likely to be more evident among equities and gold. As for FX, a risk-on gap at the open is very much in the offing given all the anticipation last week and the dollar may also see some gains as traders will surely now further question odds of a 50 bps rate cut by the Fed next month.

But it won’t be too long before traders and investors start asking themselves whether or not the concessions made here can lead towards a deal in the bigger picture.

In my view, the more structural issues remain a difficult gap to bridge for both countries unless they’re willing to move their red lines. We’ll see if that changes but I highly doubt a trade deal is imminent despite talks being revived. As such, it’ll only be a matter of time before markets – and any optimism from today – have to deal with that reality as well.

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Citi base case is bullish yuan, expect US-China trade truce at G20

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Japan’s Aso: US-China situation seems a little different this time

Comments by Japanese finance minister, Taro Aso

  • Says US and China are talking about fundamental issues

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It’s either he knows something more (which I doubt) or he’s just assuming how the situation currently is. And you know what they say about people who ass-u-me.

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Latest from Moody’s is a warning on a breakdown in US-China trade talks

Moody’s the ratings agency warn:

If an abrupt breakdown in US – China trade talks happen, this would lead to 

  • policy uncertainty,
  •  increased risk aversion
  •  and abrupt repricing of risk assets globally

Ummm.

OK then. 

This is what just happened in past days and hours. 

For example, check out the slide in risk assets as described in the latest wrap: 

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Germany's Altmaier: Europe feels the effects of US-China trade tensions

Comments by German economy minister Peter Altmaier

  • US-China trade talks are positive, but long way to go

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Regardless, the softening economic growth pressures on the German/Eurozone economy is going to be a major theme to watch out for in the first quarter of this year. It will be a question of whether or not a further slowdown will cause a rethink in the ECB’s forward guidance on rates of “through the summer of 2019”.

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USD Flat In Asia As US-China Trade Talks Progress

© Reuters.  The U.S. dollar was flat on Friday morning in Asia © Reuters. The U.S. dollar was flat on Friday morning in Asia

Investing.com – The U.S. dollar was flat on Friday morning in Asia as the Japanese yen dipped after U.S. President Donald Trump tweeted over the weekend that trade talks with China are progressing well.

The , which tracks the greenback against a basket of six major currencies, was up 0.01% at 96.40 by 10:50 PM ET (3:50 AM GMT).

The was trading at 6.8784 with Chinese markets closed on the last day of the year.

The pair gained 0.15% with the yen trading at 110.42. The safe-haven yen was sought-after at the end of the year as investors entered into risk-off mode over concerns of slowing global economic growth, trade tensions between the U.S. and China and volatility in equity markets.

Elsewhere, the pair and the pair gained 0.38% and 0.21%, respectively.

The CNY came under pressure Monday as the National Bureau of Statistics released the official , which showed the country’s first manufacturing decline in more than two and a half years. The manufacturing PMI slid to 49.4, with a reading below signalling contraction.

U.S. President Donald Trump said in a tweet that he “just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!”

Bloomberg reported that a U.S. government delegation would travel to Beijing in the week of Jan. 7 to hold the first face-to-face trade talks with Chinese officials since Trump and Chinese President Xi Jinping agreed to a 90-day truce during a G20 meeting in Argentina earlier this month.

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Video: The Fed and the big question about US-China relations

HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.

ADVISORY WARNING: FOREXLIVE™ provides references and links to selected blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect’s individual analysis and decision making. None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FOREXLIVE™ specifically advises clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FOREXLIVE™ expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.

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