Archives of “April 2019” month

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Mnuchin: Hopes that US, China can finalise trade deal in two more rounds of talks

  
Analysis, Economy

Hopeful optimism? We’ve been here before…

  • Enforcement mechanism in US-China trade talks is close to done
  • Says that Chinese espionage issues are separate from trade, economic issues
  • Not concerned about US yield curve, not worried about recession risk
This feels like a paraphrase of the previous edition of optimistic headlines saying that we could’ve seen a trade deal in April and then May and as of last week, June. Nonetheless, the two parties are scheduled to meet again tomorrow so let’s see if there will be anything notable after their talks this time around.

IMF: Saudi Arabia needs oil at $85 to balance budget

  
Analysis, Crude

IMF projects a higher budget deficit for Saudi Arabia in 2019

They see the kingdom posting budget deficit of 7.9% of GDP this year and that is notably higher than the 4.6% budget deficit seen in 2018. IMF notes that in order for the kingdom to balance its budget, oil must move towards $85 at least.

Well, Saudi Arabia is already trying to get it up to $80 with their lack of conviction in responding to Iran sanctions so…

Challenge accepted

China – US trade talks recommence on Tuesday. Mnuchin says talks in ‘final laps’.

  
  Analysis

US Treasury Secretary Steven Mnuchin and Trade Representative Lighthizer will be in Beijing again tomorrow for more talks on trade with the Chinese.

The flow of b/s hasn’t stopped, Mnuchin in the NY Times:
  • “We’re getting into the final laps”
And concedes:
  • more work remains to be done
  • talks are nearing a point where they would either produce a deal or end with no agreement
  • declined to predict whether the negotiations would be wrapped up by the end of June
This despite the US giving in on more Chinese demands …. concessions on drug protections.
US Treasury Secretary Steven Mnuchin and Trade Representative Lighthizer will be in Beijing again tomorrow for more talks on trade with the Chinese.

Here’s what you missed in Asian markets while you were watching GOT

  
  Analysis

well, not much here either …  The US dollar is barely changed since early Asia. Chinese stocks are down though.

  • Chi next down circa 1%
  • Shanghai composite down 0.6%
  • HK is up half a percent
  • Australia (ASX) down half a precent
 As I said the USD Is little changed, down a touch. EUR/USD, AUD/USD, NZD/USD all up a few points to begin the week. Cable also.
Yen us very quiet indeed. Japan is on holiday but that’s no excuse, everyone lese here in Asia is open.
Well, not much here either …  The US dollar is barely changed since early Asia. Chinese stocks are down though.

Day 1 of Japanese Golden week market holidays passes without a flash crash. 5 to go.

  
  Analysis

Japanese markets are closed this week and Monday next week. reopen Tuesday 7 May.

  • Japan’s Financial Services Agency is warning of possible increased volatility in financial markets.
  • Japan 10-day market closure … here’s the reason there is huge fear of a yen flash crash

With Japan out the light liquidity for forex prior to Japan opening has been extended each day to Singapore and Hong Kong markets getting active. Fears are of another flash crash like we saw in January (see the links, above)..

Its 8.30am in and Singapore now, so day 1 is pretty much in the bag.
No flash.
Japanese markets are closed this week and Monday next week. reopen Tuesday 7 May.

Oil – Kuwait voicing concern over threats to close the Strait of Hormuz

  
Analysis, Crude

Kuwait’s deputy foreign minister with some alarm prior to oil markets getting active this new week.

  • Says the country is looking at threats orehere  heref closing Strait of Hormuz with concern
  • Hopes to distance region from this tension
This is in relation to Iran expressing intent to close the Strait. This has been ongoing, accelerating in past days. Iran once again threatened to close the Strait of Hormuz over the weekend. The US have demanded buyers of Iranian oil stop purchases by May or face sanctions.
Oil markets and the Straits of Hormuz Iran US conflict.

Both S&P and Fitch rating agencies warn UK rating still at risk from a no-deal Brexit

  
  Analysis

S&P Global Ratings and Fitch Ratings have warned the UK credit rating remains at risk of a further downgrade.

Fitch acknowledge that the Eu extension granted to the UK (until 31 October) dies reduce the risk of a no deal exit, but does not eliminate it.
S&P cite amongst reasons for their negative outlook
  • risk of sustained economic weakness
  • worsening government finances
if the UK loses its access to EU markets.  Add that the are wary of investors losing confidence in the UK and risk that GBP status as a reserve currency.
S&P Global Ratings and Fitch Ratings have warned the UK credit rating remains at risk of a further downgrade.

Federal Reserve FOMC meeting this week – heads up preview

  
  Analysis

The Federal Open Market Committee meet his week, announcement on May 1.

Spoiler alert – expect no change, on hold. That’s pretty much unanimous.
At the March meeting the committee affirmed the shift to dovish, revising down forecasts for economic activity and for rates ahead. Wariness was enhanced, risks noted more strongly, and that tone is likely in communications after this meeting. Having said this, sentiment globally has improved a touch, the outlook for China is not as dour. And Friday’s US GDP report was a ripper. This is reflected in market pricing for Fed cuts for the rest of 2019 having declined.
The Federal Open Market Committee meet his week, announcement on May 1. 
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