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Trump and Powell spoke for five minutes on May 20

No word on what they spoke about

I’m sure Trump just called to say how much he respected the Fed’s independence.
The report comes from the just-published calendar.
No word on what they spoke about

Here was the news wrap from May 20. There wasn’t much going on that day but Trump and Powell did both speak later that evening. Here were the comments from Powell. He also said that it was premature to make judgement on trade & tariff impacts on path for monetary policy.

Trump voices displeasure over Iran breaching uranium stockpile limit

More sanctions to follow?

US Iran

Trump tweets:

Iran was violating the 150 Billion Dollar (plus 1.8 Billion Dollar in CASH) Nuclear Deal with the United States, and others who paid NOTHING, long before I became President – and they have now breached their stockpile limit. Not good!

This comes after the International Atomic Energy Agency confirmed overnight that Iran has now exceeded its supposedly agreed stockpile limit of low-enriched uranium, which breaches one of the key points in the 2015 nuclear deal.
Even so, reports say that Iran is still a long way off from being able to produce a bomb but when you see Trump tweet something like this, it’s never too long before something happens again amid escalating tensions between the two countries.

Trump, China & the Fed

I think it’s entirely possible we leave Osaka with a mild escalation -something like expanded 10% tariffs – enough to scare both China & the Fed into more stimulus & a 50bps cut. Then walk it back in 2020 with a juiced economy. Same playbook as Iran/SA

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.

The chaps at China’s Global Times say US growth claims are fake news

if these guys are setting the tone for the talks between Xi and Trump … well Monday early markets could be very interesting indeed!

Global Times (never shy about a bit or US prodding):
  • The claims that US growth will accelerate are false. 
  • Instead growth in 2019 will fall. 
  • And growth in 2020 will be even lower than in 2019 – a serious issue for Trump as 2020 is an election year
They add in the pic:
If these guys are setting the tone for the talks between Xi and Trump … well Monday early markets could be very interesting indeed! 

G20 starts today, US – China meeting tomorrow. Deal seen as unlikely … but

Perhaps there is scope for some sort of US – China agreement stemming from the Trump – Xi meeting at the G20 summit.

‘Agree to keep talking’ seems the most likely outcome IMO, but we’ll soon find out. Any increase in hostility would be a negative but a dinner together is probably not going to lead to this, at least right away.
When do we get a deal? If we do.?
An interesting overnight note from ING says it’ll not be until towards the end of this year:
both sides want a deal
  • China can hurt the US economically but it knows that the US can hurt China even more. 
  • President Trump needs a deal to show the American people that he delivers on his promises to get better terms of trade for the US. He knows that this is best done without the US economy having to suffer from Chinese retaliation for an extended period of time.
We expect a deal to be struck in the last quarter of this year
  • it is likely that China as well as the US are prepared to make concessions in the end
  • After all, this is what’s happened in the renegotiation of Nafta
  • To strike a deal, Trump had to accept that Mexico and Canada would not agree to all of his original demands
On that 
  • Trump had to accept that Mexico and Canada would not agree to all of his original demands
You’d say the same of China, but so far they’ve held firm. 
Added – G20 start 28th.