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European shares end the session lower. Spain’s Ibex leads the way lower

German DAX tries to move back to positive on the year, but fall short this week

The major European indices are ending the session lower. The declines the downside are being led by Spain’s Ibex which fell around 2%. Madrid is enacting mobility restrictions on fears of Covid resurfacing. The German DAX tried to move back positive for the year but fell short with today’s declines.

The provisional closes are showing:
  • German DAX, -0.4%
  • France’s CAC, -1.0%
  • UK’s FTSE 100, -0.5%
  • Spain’s Ibex, -2.0%
  • Italy’s FTSE MIB, -0.9%
For the week,
  • German DAX, -0.6%
  • France’s CAC, -0.8%
  • UK’s FTSE 100, -0.2%
  • Spain’s Ibex, unchanged
  • Italy’s FTSE MIB -1.2%

Could Trump start another trade war this fall?

The China-US dynamic isn’t improving

The China-US dynamic isn't improving

As tensions between the U.S. and China rise, President Donald Trump has signed an executive order that will effectively ban Chinese social networking app TikTok from the U.S. market, unless it is bought by a U.S. buyer.

President Trump stressed that there will be no extension to the TikTok deadline set for September 15th, despite the fact that Treasury Secretary Steven Munchin told CNBC on Monday that the deadline for the TikTok deal was September 20th, not the 15th, as previously announced.

So what’s the reason behind Trump’s executive order?

Well, some say it’s largely due to national security concerns, data security and privacy – despite the fact that TikTok doesn’t breach any national security or privacy laws.

The Trump administration will survey the “technical partnership” bargain struck among Oracle and ByteDance, the Chinese group that owns TikTok, before deciding on whether to endorse the arrangement or not.

Meanwhile, President Trump has focused on the need for an instalment to be made to the US Treasury as a component of any arrangement, a remarkable interest that the White House has yet to clarify.

Officials acquainted with the arrangement said the understanding excluded any instalments to the US Treasury.

A senior US official said there were no current conversations about an instalment except that the arrangement would result in economic benefits. In addition, an individual associated with the discussions added that the two organizations would invest vigorously in the U.S. and create a huge number of jobs.

Oracle is noticeably not referring to the agreement as either a sale or acquisition. Maybe it’s a joint venture? Or a vendor agreement?

Oracle Corp. has a history of cooperating with the US government. This makes its partnership with TikTok a key move during the wave of Chinese restrictions going through the White House and Congress.

Oracle has apparently won the competition to take over TikTok’s U.S. operations. TikTok’s Chinese owner ByteDance has rejected Microsoft’s antagonist bid.

A deal between ByteDance and Oracle is appearing to be more of a corporate restructuring rather than the direct sale Microsoft had suggested.

According to “the Wall Street Journal” Oracle has been adopted as a “trusted tech partner”. This is unlike an outright sale, which implies that Oracle will be assisting to manage TikTok’s operations with its individual cloud technologies.

Yet, the arrangement will require the endorsement of both U.S. and Chinese authorities. U.S. authorities will need to be certain that TikTok’s client information will not find its way back to Beijing, while China will need to accept the regulations on AI imposed on it by the U.S. authorities.

The acquisition will help Oracle get important demographic data and information. This information can help Oracle get its foot in the door of new businesses. For instance, the organization could enter the online media space with the assistance of TikTok, thereby opening ways to more information.

The Chinese yuan rose to its highest point since the news came out in May. Oracle’s shares traded as much as 17% higher in early trading before the markets opened in New York on Monday, after closing at $57 on Friday.

The Committee on Foreign Investment in the United States “CFIUS” will audit the offer this week “and afterwards we will make a proposal to the President and survey it with him.”

Whether it is bullying or preserving national interests, will the Chinese company give in to President Trump?

Only time will tell…

Trade Safe.

USDJPY down for the 5th consecutive day

Sellers push toward July lows but does find some stall

The USDJPY had a 59 pip trading range last week.  This week, the non trend has seen a march lower. The pair is down for the 5th day in a row today. The range is 188 pips.
Sellers push toward July lows but does find some stall
Looking at the hourly chart, the pair did try to extend above a topside channel trend line in the Asian session but did run into a swing area from Wednesday and Thursday (see red numbered circles) and rotated back to the downside.  The pair moved below the low from yesterday at 104.516. That is now close risk for shorts, as is the old trend line at 104.57 (see chart above).  Stay below keeps the sellers firmly in control. A move above would muddy the intraday waters a bit technically.
Drilling to the daily chart, the price low today reached 104.267. That got within 8-9 pips of the swing low from July at 104.18.  A move below that level would take the pair to the lowest level since March 12.  The level did attract some early buyers as risk could be defined and limited.
USDJPY on the daily chart

Taiwan’s Defence Ministry on Chinese jet incident

Tensions over Taiwan

Tensions over Taiwan 
  • Taiwan’s Defence Ministry report that multiple Chinese Jets crossed the mid-line of the Taiwan Strait on Friday
  • Taiwan scrambled fighters and deployed air defence missiles to monitor the Chinese aircraft
US Gov’t reported to be selling $7 bin of arms to Taiwan including cruise missiles and drones
Chinese PLA aircraft were warned off the prior day after entering Taiwan’s air defence identification zone
Global time reported overnight that China’e Eastern Theater Command is conducting live-fire exercise near Taiwan Straits. This was reported to be legitimate and necessary to protect the mainland and protect its sovereignty and integrity
Tensions between Taiwan, China and the US have potential to spill over. This incident won’t cause much alarm, but just be aware of it. Taiwan and China issue is a long standing tension. Wound being picked with these kinds of moves…

UK’s Health Secretary – Virus accelerating across the country

COVID-19 in focus for the UK

COVID-19 in focus for the UK
  • More measure brought in across North East of England
  • Virus accelerating across the country
  • Number of people in hospital doubling every 8 days
  • National Lockdown never off the table, but it is the last line of defence
  • Belgium took action, but they took action and it came down
  • Testing labs are working flat out

Matt Hancock when asked ‘how close to a second UK lockdown?’ replies, ‘ I cannot give you answer yet’.

Ok, things are accelerating in terms of cases in the UK. This adds to the German high case levels earlier and plays into the rising cases across Europe narrative.
GBP down a few ticks, but no alarm in the price action yet. One to watch