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G20 financial leaders to say global economic growth is to pick up modestly in 2020, 2021

  
Analysis, Economy
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According to Reuters, citing a draft communique on the matter

World
  • There are signs of easing tensions
  • Downside risks to growth include coronavirus outbreak
  • To enhance global monitoring, stand ready to take further action
  • Monetary policy should continue to support economic activity, ensure price stability
Just take note that the summit will take place this weekend as we will see global leaders and central bank representatives come together to meet – for whatever reason.
The draft communique also says that financial leaders are to reaffirm their exchange rate commitments and conclusions on trade as per the Osaka summit last year.

China said to stagger reopening of schools in order to limit coronavirus transmission

  
  Analysis
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Reuters reports, citing a government official on the matter

No firm date is being given on the matter but earlier in the month, China has said that students will only return to school next month.

It makes sense to split the reopening into batches but if anything else, it just goes to show that it will take more time before China returns back to normality again.

Foxconn is still in negotiations with China’s government about reopening some some plants

  
  Analysis
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Reuters report citing a source with direct knowledge:

  • Have received approval to recommence operations at plant in Zhengzhou
  • Still in talks about resuming production in plant in Shenzen
  • Still in talks about resuming production in plant in Kunshan
Reports have varied over the weekend on the success or not of Foxconn restarting operations at plants in China. This the latest.

Russia is not supporting a deeper output OPEC+ cut – report

  
Analysis, Crude
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Reuters report

Russia is not supporting a deeper oil output cut and prefers and extension of the current pact, according to Reuters sources.
WTI briefly dipped below $50.50 on the headline.
Russia was grandstanding against the December cut before it fell in line. All that said, the only one who is really cutting is Saudi Arabia. The Russian ‘cut’ is the usual cold weather slowdown.

OPEC+ said to be considering additional 500k bpd oil output cut due to virus impact

  
  Analysis
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Reuters reports, citing two unnamed OPEC sources on the matter

The sources say that most OPEC members agree on the need to cut oil output further and that they are considering to have a meeting on 14-15 February now. Just one to keep in mind as such a move may provide some relief to oil prices in the near-term.

That said, once again it will be an issue on compliance to see how effective these cuts are. Oil is getting a bit of a pop on the headlines, with WTI crude now up 0.4% to $51.80.

US politics impeachment news – Republican senator hints at calling witnesses

  
Analysis, Politics
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Reuters with the item of note:

  • U.S Republican senator Murkowski, in question, says ‘dispute about material facts weighs in favour of calling additional witnesses’ in Trump impeachment trial
This, of course, does not mean witnesses will be called. The farcical circus is set to continue. But, for the politics folks, a glimmer of a crack appearing?

North Korea warns the US that there may not be deunclearisation if sanctions continue

  
Analysis, Politics
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Some comments from North Korea being cited by Reuters

US NK
  • US has ignored year-end deadline for nuclear talks
  • No reason for North Korea to be unilaterally bound to any commitment
  • US is applying ‘the most brutal and inhuman sanctions’
  • If US continues with ‘hostile policies’ towards North Korea, there will never be denuclearisation of the Korean peninsula
Much like the Iran issue, this is one that does not really matter until it does – when something escalates in a significant manner. For now, just take note that US-North Korea relations have been deteriorating as of late and tensions are beginning to mount once again.

Reuters Tankan – Japan manufacturers sentiment index -6 (unchanged from December)

  
Analysis, Economy
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The monthly Reuters Tankan is more timely than the quarterly report of the same name from the BOJ.

  • January manufacturers’ sentiment index comes in at -6 (unchanged from Dec)
  • Service-sector index +14 in January vs. flat vs Dec
  •  Manufacturers’ mood seen up ahead, service sector down
Pessimism amongst Japanese manufacturers persisted in January, usual suspects cited:
  • China-U.S. trade tension
  • sluggish global demand
Looking ahead though,  some believed conditions will improve in the next few months
  • seen to 0 in April
Service-sector outlook sees 13 in April (slight fall)

Unanswered phase one deal question is what imports China commits to (and the caveats)

  
Analysis, Politics
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Will there be a hard target? What about pricing?

Will there be a hard target? What about pricing?
Reuters today reports that China has pledged to buy nearly an additional $80 billion in manufactured goods from the US over the next two years plus $50B more in energy supplies. The deal also calls for Chinese purchases of agricultural goods to increase $32B over two years and imports of US services by about $35 billion.
However some of the details may be kept secret and instead we would get targets for four broad areas: energy, manufacturing, services and agriculture with a total near $200B above the 2017 baseline.
From the Chinese side they risk running afoul of WTO rules and the multilateral system they’re trying to uphold. However that could be mitigated by provisions in the deal that say the US will have to provide the goods at competitive prices.
Global Times editor (and party mouthpiece) Hu Xijin appeared to confirm the deal with that caveat:
As far as I know, China did make a commitment to expand imports from the US. China has a huge market which is growing quickly. It will be more of a test for the US whether it can provide enough products that Chinese market welcomes and are competitive in price.

Iran believed to have deliberately sought to avoid US military casualties in strikes – report

  
  Analysis
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Reuters report, citing US and European gov’t sources

It looks more and more like they dropped a few bombs in the nearby desert and may have even sent out warnings ahead of time.
If Trump chooses to de-escalate this looks like a sly move to save face without going to war. Then again, many wars have been started by a slight miscalculation.
Trump is set to speak at the top of the hour.
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