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Moody’s on the phase 1 US-China deal – will not resolve core differences

  
  Analysis
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Moody’s downbeat not only on the trade deal …

  • says outlook for APAC corporates remains negative in 2020 amid slowing global growth and trade policy uncertainty
  • “while positive, the US-China trade agreement will not resolve core differences, dampening business sentiment globally”
  • global economic growth will remain lacklustre, with growth in the US and China decelerating to 1.7% and 5.8% respectively in 2020
  • expects major central banks, including US Fed ECB, & BOJ will maintain accommodative monetary policies

Dunno, at least until the November US election we can expect US-China differences to be swept under the carpet? Or, maybe not?

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APAC is Asia-Pacific in case you are wondering.

3 big doubts on the phase 1 US-China trade deal

  
  Analysis
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The Financial Times flags concerns that business have with the trade truce signed by the US and China

  • left billions of dollars of US tariffs on Chinese goods in place
  • doubts about whether the truce will stick
  • a desire for US officials to complete the work by extracting further structural concessions from Beijing
The piece does say, more positively that the risk of a new escalation in tariffs and tension in the near term – and possibly even until after the November 2020 presidential election – is lower.
  •  there is still broad concern in corporate America that the truce is fragile and limited. If the Trump administration believes that China is not living up to its commitments, it could quickly and unilaterally move to impose new tariffs on Chinese goods, leading to a new escalation.
Yep … this is not over, as we all know.
FT link, may be gated.

Some geopolitical comments from China and France are hitting the news wires

  
Analysis, Politics
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Speaking on the Middle East risks

France’s foreign minister is saying:
  • if tensions are not diffused today than there is a real risk of war in Middle East
  • there is still room for diplomacy on Iran crisis
  • Iran must refrain from reacting, start broader talks
  • says Soleimani was a key player in destabilizing the region
  • latest decision by Iranians enables them to enrich uranium without constraints
  • we can question the validity of nuclear deal in long-term
  • decision on triggering Iran nuclear deal dispute mechanism process will be made in coming days
meanwhile China is saying:
  • US unilateral use of force has violated international law and destabilizes the region
  • Urges US not to use a further force in Middle East, calls on all parties to exercise maximum restraint

Finally, the Trump administration has said that they would provide closed-door briefing on Iran to the full US Senate on Wednesday.  Secretary of State Pompeo, defense secretary Esper and CIA director Haspel, and Joint Chiefs of Staff chairman Milley will address the Senate.

I guess the earlier tweet by Pres. Trump will be stepped up with some more formal communication.
Speaking on the Middle East risksFrench Foreign Minister says

UN sec-gen ‘deeply concerned’ North Korea said it could resume weapons tests

  
  Analysis
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Celebrated trolls of the year (2019 version) North Korea / Kim Jong Un are off to a lead position for 2020.

Kim Jong Un said earlier in the week that there are no longer grounds for him to be limited by his self-declared moratorium on intercontinental ballistic missile and nuclear weapon testing & a “new strategic weapon” will be unveiled in the near future
Prompting United Nations Secretary-General Antonio Guterres to say (through a spokesperson) that he hopes there will no new tests.
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The 2020 US election year will be, I suspect, very interesting indeed. In Chinese curse terms that is.

China has ordered government offices, public institutions to remove foreign computer equipment & software

  
  Analysis
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The Financial Times reports on the latest from China

China’s administration has ordered all government offices and public institutions to remove foreign computer equipment and software within three years
  • targets Chinese buyers to switch to domestic technology vendors
Sounds like the Chinese version of the Trump admin’s directive to halt ourchases of Chinese tech?
Here is the FT link, may be gated.
And Huawei we go!
Financial Times China microsfot dell
This is unlikely to be viewed as a positive for US-China relations. Should be a ‘risk’ negative.

North Korea tests missiles a month ahead of deadline for US talks

  
  Analysis
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Breaking a month-long lull in missile tests, North Korea fired two short range missiles into the sea off its east coast on Thursday in what appeared to be the latest try out of its new multiple rocket launchers, South Korea’s military said.

The test-firing came as the clock ticks down on the year-end deadline that Pyongyang had given the United States to restart stalled denuclearisation talks.

South Korea’s Joint Chiefs of Staff (JCS) said the North fired the two missiles into the sea from launchers in the eastern coastal town of Yonpo at around 5 p.m. (0800 GMT).

The rockets travelled up to 380 kilometres (236 miles) and reached an altitude of 97 km (60 miles), the JCS said.

Japanese Prime Minister Shinzo Abe said the launch was a threat to not only Japan but the region and beyond, though his defence ministry said the projectile did not enter Japanese airspace or its Exclusive Economic Zone.

“We will remain in close contact with the United States, South Korea and the international community to monitor the situation,” Abe told reporters. (more…)

Key Apple suppliers ready more non-China production

  
  Analysis
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The world’s two largest contract electronics suppliers, Foxconn and Quanta Computer, said on Wednesday that they will continue to move production capacity out of China to cope with the protracted trade war.

“The U.S.-China trade war is very dynamic and our clients are monitoring the situation closely,” Foxconn Chairman Young Liu told reporters. “We have to be well prepared and expand capacity at the fastest pace when our clients make decisions [to move].”

Formally traded as Hon Hai Precision Industry, Foxconn’s other key clients include China’s Huawei Technologies, Google, Amazon and Tesla. The company makes a wide range of goods such as smartphones, PCs, servers and electronics components, many of which have been hit by Washington’s tariffs.

Foxconn has manufacturing facilities in 16 countries, but 75% of its capacity is in China. It is the country’s largest employer and exporter. But now the company’s decadeslong production portfolio has begun to change owing to the trade tensions. (more…)

Singapore loosens monetary policy for first time in 3.5 years

  
Analysis, Economy
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Singapore has moved to loosen its monetary policy for the first time in three-and-a-half years to help offset slowing economic momentum due to prolonged U.S.-China trade tensions.

As a small, heavily trade-dependent economy, the country has been heavily exposed to the tariff battle between two of its largest trading partners. Exports have been falling at a double-digit pace from last year’s levels.

The Monetary Authority of Singapore, the central bank, said in its semiannual policy statement Monday that it would slightly decrease the slope of the Singapore dollar’s exchange policy band, a move to guide a weaker appreciation of the local currency.

The nation’s monetary policy is based on its exchange rate whereby the Singapore dollar is managed against a basket of currencies representing the country’s major trading partners.

With this move, Singapore follows regional peers such as Indonesia, the Philippines and India, all of which have eased monetary policy by cutting interest rates in recent months.

Singapore’s adjustment comes as trade-related industries stagnate under pressure from the U.S.-China standoff, though economists say domestically focused sectors have held up better. (more…)

Saudi Arabia’s head says attacks on oil facilities were an act of war by Iran

  
Analysis, Politics
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Saudi Arabia’s Crown prince in an interview on US TV

  • Said oil prices could spike to “unimaginably high numbers” if the world does not come together to deter Iran
  • said he would prefer a political solution to a military one
  • agreed with U.S. Secretary of State Mike Pompeo that the attacks were an act of war by Iran
  • a war between Saudi Arabia and Iran would collapse the global economy
US Sunday evening futures trade in oil is open, a little higher to begin the week.
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