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Saudi-led coalition launches military operation in Yemen

If it was against Iran directly there might be some forex impact but Yemen, no.

If there are market jitters watch for flows out of risk and into havens. But nothing evident right now.
  • Saudi state TV with the report of a military operation Yemen against military targets

Pompeo to meet with Saudi crown prince later today

The meeting will be in Jeddah to coordinate efforts in order to counter Iranian aggression in the region

The above is being confirmed by the US embassy in the UAE. It looks like more of a meeting to try and get the Saudis on board that Iran were behind the attack and to plot out the next course of action in response.

Just something to take note of in case we hear of anything on the matter later today.

Markets eventually need to deal with the China reality

The situation in Saudi Arabia and focus on the Fed has took the spotlight away from China’s economic worries to start the week

China
  • China’s Premier Li says maintaining economic growth of 6% or more is very difficult
  • China Industrial Production in August 4.4% y/y (expected +5.2%)
  • China Retail sales for August: 7.5% y/y (expected +7.9%)
I still don’t think markets are paying much attention to the message emanating from China to start the new week, and that may be a sign of complacency.
Industrial production slowed to its weakest in 17 ½ years while retail sales slumped more than expected and the PBOC is still showing no signs of easing its lending rates just yet – as evident by today’s MLF operations.
Prospects of a trade deal may sound attractive for risk sentiment but it isn’t going to be a massive game changer to the slowing Chinese economy in my view. Domestic demand is weakening and that will continue to eat away at global economic growth.
Markets may be a bit distracted for the time being amid oil news, central bank focus, and hopeful optimism surrounding trade talks. But don’t expect that to stay the course for too long. The longer the ramifications of the above go unnoticed, the greater the hit it will have on markets when reality snaps back in.

South Korea begins military drills around disputed island amid feud with Japan

South Korea’s military will conduct two days of drills around a tiny island also claimed by Japan, Yonhap news agency reported on Sunday, just days after Seoul decided to scrap an intelligence-sharing pact with Tokyo amid worsening relations.

Tokyo and Seoul have long been at loggerheads over the sovereignty of the group of islets called Takeshima in Japanese and Dokdo in Korean, which lie about halfway between the East Asian neighbours in the Sea of Japan, which Seoul refers to as the East Sea.

The military drills were scheduled to begin on Sunday, Yonhap reported, and could exacerbate tensions between the two neighbours.

South Koreas on Thursday had announced the scrapping of the intelligence-sharing pact with Japan, drawing a swift protest from Tokyo and deepening a decades-old dispute over history that has hit trade and undercut security cooperation over North Korea.

Relations between South Korea and Japan began to deteriorate late last year following a diplomatic row over compensation for wartime forced labourers during Japan’s occupation of Korea.

They soured further when Japan tightened its curbs on exports of high-tech materials needed by South Korea’s chip industry, and again this month when Tokyo said it would remove South Korea’s fast-track export status.

The disputed islands have long been one of the most sensitive areas of contention for South Korea and Japan. Recently, South Korea and Japan traded words over the way the islands were described on a website for the 2020 Tokyo Summer Olympics.

The islands were at the centre of a more serious clash in July, when both South Korea and Japan responded to what they saw as a violation of their air space near the islands by a Russian military plane.

China only a hair away from US in Fortune Global 500

China is now neck and neck with the U.S. in Fortune Global 500 members, reflecting a shift in economic power that lies at the heart of trade tensions between Beijing and Washington.

This year’s ranking of the world’s 500 largest businesses by year-earlier revenue includes 119 Chinese companies, up from 111 in 2018. U.S. enterprises declined to 121 from 126. Two decades ago, Chinese entries numbered in the single digits. So “though China has a stronger presence near the bottom of the roster than the top, it’s clear where the momentum is,” wrote Clifton Leaf, editor-in-chief of Fortune magazine.

Among the 39 Chinese companies in this year’s top 150, all but five are state-owned enterprises. They include banks, automakers, and such energy giants as Sinopec Group, China National Petroleum and State Grid, which have solidified their positions in the top 10.

Major Chinese major technology companies are rapidly moving up the ladder, with Alibaba Group Holding and Tencent Holdings climbing 118 and 94 rungs to No. 182 and No. 237. Hong Kong-listed Xiaomi debuted on the list at No. 468.

These patterns highlight core issues underlying the Sino-American trade war: China’s rising economic prowess, a technology race where it is rapidly catching up, and a clash of economic paradigms. (more…)

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