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G20 says 36 of 77 eligible countries have applied for debt relief

  
  Analysis
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Group of 20 major economies offered a suspension of official bilateral debt payments to77 eligible countries

  • 36 of the 77 have applied
The offer is to help countries combat the coronavirus pandemic and its economic impact.Saudi G20 secretariat said the debt relief initiative approved in April could provide immediate liquidity of $14 billion as more countries participated and that amount could increase significantly if additional creditors, including multilateral development banks and private-sector creditors, joined the initiative.
(info via Reuters )
Group of 20 major economies offered a suspension of official bilateral debt payments to77 eligible countries

Japan trade balance for October Y 17.3bn (expected Y 229.3bn)

  
Analysis, Economy
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Japan trade balance for October Y 17.3bn

  • expected Y 229.3bn, prior Y -124.8bn

trade balance adjusted Y -34.7bn

  • expected Y 248.1bn, prior Y -97.2bn

exports -9.2% y/y –  worse than expected and the biggest y/y fall in 3 years.

  • expected -7.5%, prior 5.2%

imports -14.8% y/y – not as bad as expected but not good, ditto on the biggest y/y fall in 3 years.

  • expected -15.2%, prior -1.5%
More on export performance. Exports to:
  • the US down 11.4% y/y
  • to China down 10.3% y/y
  • to the EU down 8.4% y/y
  • to Asia down 11.2% y/y

‘Phase 1’ of US-China deal was easy, now comes the hard part

  
Analysis, Economy
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 Even as the “phase one” trade deal between the U.S. and China averted an escalation of the trade war, the agreement is widely seen as a small-bore pact that focused on relatively easy issues, such as agricultural and currency.

The deal was a product of compromise by two countries eager for a respite amid growing concerns about economic slowdowns. The two nations must tackle structural issues, such as China’s government subsidies, in the next phase of talks, and a real end to the trade war that would eliminate punitive tariffs imposed on each other still remains elusive. 

U.S. President Donald Trump was exuberant in announcing the agreement that would ease the pain of the Midwestern farmers that make up the core of his support base.

“The deal I just made with China is, by far, the greatest and biggest ever made for our Great Patriot Farmers in the history of our Country,” Trump tweeted Saturday morning. “In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out. Thank you China!” 

In contrast, the Chinese side remained subdued. Beijing issued a statement reporting progress in agriculture but did not mention an “agreement.” State television reported the deal, although it downplayed the story. Trump’s about-face in May last year after an agreement to avoid tariffs was not lost on top Chinese officials.  (more…)

China trade balance data for August – surplus comes in below median estimate

  
Analysis, Economy
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Trade balance data out from China Sunday will not be viewed as a positive input for China-related risk markets.

The counter to this is, of course, the expectation of stimulus from China, some of which we have already indeed seen (eg. only on Friday we got news of  the cut to the RRR) and more is forecast.

Yuan terms trade balance data

Surplus for the trade balance of 239.60bn … miss

  • expected CNY 299.3bn, prior was CNY 310.26bn

Exports +2.6% y/y … miss … slowing global growth and US tariffs key points for exports missing

  • expected +6.3%, prior was +10.3%

Imports -2.6% y/y  – falling imports are often associated with domestic economic weakness -this result not as sharp a fall as expected.

  • expected -3.1%, prior was +0.4%

USD terms

China trade balance: $+34.84

  • expected $44.3bn, prior was $44.58bn

(more…)

ICYMI – Warnings of turmoil in markets if the US intervenes in the Chinese yuan

  
  Analysis
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The Financial Times ran a piece overnight canvassing potential US intervention to drive the USD down against the Chinese currency.

The background to this is
  • strong, and stronger USD, despite the Fed’s rate cut
  • The US naming China as a currency manipulator
  • USD/CNY and USD/CNH moving above what was though as a bit of a ‘line in the sand’ at 7 (wheter it is is/was or not remains to be seen)
  • Plenty of chatter and speculation that the US admin could intervene to send the dollar lower
Via the FT:
  • One senior staffer at a London-based Chinese bank said the US could conceivably intervene in the offshore renminbi market, where the currency is traded more freely than on the mainland. But the consequences could be serious.
  • “If you take on China on the currency . . . it would be interpreted as a political act and it would throw markets into turmoil,” said the senior staffer, speaking on condition of anonymity. The political fallout would be “unprecedented”, the person added.
He says market turmoil likes that’s a bad thing? 😀
(Off to the naughty corner for those thinking what I’m thinking!)
FT piece is here, may be gated

Beijing pushes envelope with 7-yuan-to-dollar reference rate

  
  Analysis
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 China’s central bank set its daily yuan reference rate at 7.0039 to the dollar Thursday, crossing the 7 line for the first time in roughly 11 years and signaling resolve even as the U.S. cries foul over the weakening currency.

Market participants speculate that Beijing may keep pushing the rate to around 7.2 to 7.3 so as to alleviate the impact of the next round of American tariffs.

But while a weaker yuan will help exporters impacted by the drawn-out trade war, the People’s Bank of China still must carefully balance these gains against the risks of runaway devaluation and capital flight.

The yuan can move only 2% in either direction from the daily reference rate on the mainland. So the rate, announced before trading starts each session, reflects the monetary authorities’ wishes.

The authorities want a gradual weakening of the yuan, said Ken Cheung, senior Asian foreign exchange strategist at Mizuho Bank.

The Trump administration just labeled China a currency manipulator Monday, after the yuan weakened past the psychological threshold of 7 in Shanghai. Setting reference rates past that line could trigger further pushback from the U.S. (more…)

Japan BoP Current Account Balance for May: ¥ 1594.8B (vs. expected ¥ 1380.9B)

  
Analysis, Economy
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Data release from Japan’s Finance Ministry, preliminary balance of payments statistics for May

BoP Current Account Balance for May, preliminary ¥ 1594.8B for a nice beat
  • expected ¥ 1380.9B, prior ¥ 1707.4B
BoP Current Account Adjusted ¥ 1305.7B
  • expected ¥ 1231.0B, prior ¥ 1600.1B
Trade Balance BoP Basis ¥ -650.9B
  • expected ¥ -758.9B, prior ¥ -98.2B
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The background to this is shrinking exports due to economic growth slowing in China, trade wars impact. Japan has had a current account surplus for 58 straight months.
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