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Archives of “May 15, 2019” day
rssChinese can sell debt to support Yuan (not just to punish the US)
Via Bloomberg
As the trade war has continued there has been a sell off in the Yuan which you can see here on the USD/CNY chart.
Price has sliced through a series of daily pivot points as Yuan weakness has taken hold. On the face of it this helps Chinese exports, but this is not Beijing’s desire to have a much weaker Yuan. The reason is that China has prioritised curbing financial risks and the strategic goal of creating a global, stable currency. The last thing it wants is wild swings in the Yuan. Have a quick read about that here from the South China Post. (more…)
Nikkei 225 closes higher by 0.58% at 21,188.56
Asian stocks are faring better after renewed optimism in Wall Street
The Nikkei is closing with mild gains as markets are recovering from the beat down suffered on Monday amid lingering trade tensions between US and China. For now, risk assets are licking their wounds as things start to settle down but the dark clouds still remain so I reckon don’t look for any solid rallies to come about just yet.
US equity futures are also up by just 0.2% currently. Just be wary of more headlines to come later from Trump or from the Chinese camp. It’s very much a battle between greed and fear now, so let’s see how things will play out.
US-China trade talks reportedly broke down as China scrapped 30% of draft deal
The Nikkei Asian Review reports
The report says that China returned a significantly reduced version of the US draft, which then drew the ire of Trump in raising tariffs on $200 billion of Chinese goods. Adding that the original 150-page document was then cut up and reduced to just 105 pages.
Citing unnamed sources, the report goes on to say that the collapse of the negotiations was predetermined by China scrapping as much as 30% of the original draft text.
This isn’t really fresh news as we had heard of something similar last week here. However, it just further confirms that the two countries are still far apart from striking a compromise at this current point in time.
Given that last week’s talks in Washington failed to bear fruit, the stalemate between the US and China certainly looks set to drag on for quite a while now. As mentioned before, both sides are done playing nice for the time being and will poke at each other until something or someone gives way down the road.
China Retail sales for April: 7.2% y/y (expected 8.6%)
Industrial output in China for April. Stimulus helping this along bt not enough. A big miss.
5.4 % y/y
- expected 6.5%,prior 8.5%
6.2 % YTD y/y
- expected 6.5%, prior 6.5%
China April Industrial production: 5.4% y/y (expected 6.5%)
Industrial output in China for April. Stimulus helping this along bt not enough. A big miss.
5.4 % y/y
- expected 6.5%,prior 8.5%
6.2 % YTD y/y
- expected 6.5%, prior 6.5%
Retail sales missed too:
- China Retail sales for April: 7.2% y/y (expected 8.6%)
and:
- China Fixed asset investment (excl rural) for April 6.1% y/y (expected 6.4%)
ICYMI: China may regulate energy imports from the US
A piece that ran in China’s Global Times overnight, pertinenet to trade war developments.
Says the GT:
- China is a big potential market for US energy, but the ongoing trade war is very likely to make China rethink its energy security and reduce its dependence on US energy exports.
- Many wonder how China will respond if the US carries out tariff hikes on an additional $300 billion in Chinese products… China’s counterattack will be on US exports.
And:
- does China have to import from the US?
- The answer is no. Thanks to trade war fears and Washington’s political uncertainty, the US is perhaps now the last choice for China in terms of energy trading.
Jeff Gundlach says there is weakness showing up in US economic indicators
Gundlach’s regular conference call – he says weakness showing up in the indicators
And:
- US GDP growth appears to be based ‘exclusively’ on government, corporate and mortgage debt
I reckon there might be more to come from JG. there usually is 😀
Here we go:
- Could have a USD 4 tln deficit if the recession is steep enough
- Atlanta Fed GDP-Now forecast is down around 1.6%
Fitch ratings agency on … errr … soybeans. China could purchase fewer US beans.
Fitch referencing the US – China trade war in their assessment that China’s purchasing of US soybeans could be “substantially tempered”.
For the remainder of 2019.
If the US and China want to come to some sort of patched up truce China agreeing to buy beans is always a go to.
Both Xi and Trump need some sort of agreement. Buy MOAR beans might just about be it.
US major indices rally on turnaround Tuesday
The major indices enjoyed a turnaround Tuesday.
The final numbers are showing:
- The S&P index rose 22.54 points or 0.80% to 2834.41
- The Nasdaq index rose 87.47 points or 1.14% to 7734.49
- The Dow rose 207 points or 0.82% to 25532.05
The gains were a welcome relief after yesterday’s run lower, but the close was not the best. The major indices ended near the middle of the low to high trading ranges. The good news is that the indices did not go negative.
Tomorrow will be key for investor sentiment. There was a little more positive chatter today from the Pres., Mnuchin, but 25% tariffs may bring revenues into the treasury, but it comes out of consumers pockets. Earnings projections and multiples could get hurt. With the market 8 days off the all-time highs when chatter was of an imminent deal (and no 25% tariffs), the story is simply not the same. The economy may or may not slow to a recession, but earnings growth for some companies, has a headwind to deal with.
PS European tariffs may also be an issue soon too…..