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Weekend HK press – China questions whether to continue trade talks with the US

  
  Analysis
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An opinion piece from an account associated with State media Economic Daily newspaper expressed pessimism about whether trade talks with the United States should continue

This in response to US President Trump’s new tariffs on China
  • It said Trump’s latest threats as “destructive”
  • “The US has again stepped back from their promises for two reasons: to pressure China into fulfilling [America’s] expectations in the deal, and to attain someone’s political aims by meddling in the Sino-US trade talks”
  • via South China Morning Post
Negatives build for  China proxy trades (such as AUD)
An opinion piece from an account associated with State media Economic Daily newspaper expressed pessimism about whether trade talks with the United States should continue 

Almost all of Trump’s advisors tried to talk him out of fresh China tariffs – report

  
Analysis, Politics

Trump overruled advisors after ‘heated’ exchange

The Wall Street Journal reports that Trump unilaterally decided that tariffs were needed after a failed round of trade talks last week.
Trump was frustrated after a briefing with Mnuchin and Lighthizer where he said neither could relay promises from Beijing to buy more agricultural goods.

“Tariffs,” Mr. Trump said to his team, one of the people said. Those present included his national-security adviser John Bolton, top economic adviser Lawrence Kudlow, China adviser Peter Navarro and acting chief of staff Mick Mulvaney.

All of them, save Mr. Navarro, a China hawk, adamantly objected to the tariffs, the people said. That spurred a debate lasting nearly two hours, one of the people said.

Trump told them his patience had worn thin.
In terms of what it means for the market this is a bad-news/good-news situation. The good news is that there is no grand, coordinated strategy here and that nearly all of the people advising Trump were against it. The bad news is that Trump is in love with tariffs and willing to overrule the people around him in order to get them.
Finally, you can’t rule out that this is a fake leak that’s part of some kind of strategy. Maybe that Mnuchin and Lighthizer go to the next round of talks and say “we need to bring back something or Trump is going to raise the tariffs to 25%.” But that seems to be a pretty questionable strategy to me.
This tweet from December remains the most-telling tweet of Trump’s Presidency.
Trump tweet

The Dog Days of August are Upon Us

  
  Analysis
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The die is cast. To defend the uneven expansion and ward off disinflationary forces, monetary authorities will provide more accommodation.  The Federal Reserve delivered its first rate cut in more than a decade and stopped unwinding its balance sheet two months earlier than it previously indicated (worth $100 bln of additional buying of Treasuries and Agencies).  Following the end of the tariff truce, and after the July jobs report,  the market was certain the Fed would cut rates again in September, according to Bloomberg and CME calculations).
The ECB has signaled its intention to ease policy in September.  It is also thought to be considering several different tools, including a deeper negative deposit rate, renewed asset purchases, and perhaps, easier terms for the TLTRO that will be forthcoming at the start of Q4.
The BOJ has downgraded its growth forecasts and acknowledges that it will not meet its inflation target for at least the next two years.   It is unlikely to move until the after October when the impact of the sales tax increase can be assessed.
The US has lifted the debt ceiling and suspending spending caps.  US fiscal policy is less restrictive, and there is talk that the Trump Administration will support efforts to index capital gains.  UK government spending to prepare for a no-deal exit will increase, but it may prove insufficient to offset the private sector investment paralysis.  Germany, it would seem from the outside, has the need and resources to expand fiscal policy (and funding at negative yields), but it lacks the will.   On the other hand, Italy has the will but lacks the means.  Japan can provide a supplemental budget if the sales tax increase makes it necessary.

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