Danske Research Team
Danske Bank A/S
- An interim deal between US and China is still on the table despite US blacklisting of more Chinese companies. Trump announced he will meet the vice Premier on Friday, which bodes well for the result of trade talks.
- Another area of tension has opened up in the US-China confrontation with the suspension of NBA pre-season broadcast in China.
- Brace for another 'lowest growth in 30 years' headline when Q3 GDP is released next week. The headline can be made every year, though, as growth is slowing on a structural basis.
Trump to meet Chinese vice premier is a positive sign
It has truly been a bit of a roller coaster up to the US-China trade talks starting today in Washington. The latest news has been US President Donald Trump's tweet that he will meet China's top negotiator Liu He on Friday, which he has only done when talks have gone well. So this is fairly good news.
Earlier this week, though, US blackliste d another 8 Chinese companies including some of China's top AI companies and suppliers of surveillance equipment in the Xinjiang province. The US also imposed visa restrictions on Chinese officials linked to the detention of Muslims in the Chinese province. China strongly condemned the actions and warned of retaliation. Some sources say China plans tighter visa restrictions for US nationals with ties to anti-China groups. The Chinese foreign ministry spokesman said "stay tuned " when asked if China would retaliate to the US blacklisting of more companies. As if this wasn't enough, another story broke that the White House is considering a limit on Chinese stocks in US government funds. The range of negative news threw cold water on expectations for an interim deal.
However, on Wednesday China signalled that an interim deal was still on the table and FT reported that China would offer to buy 10 million tonnes of US soybeans in exchange for US taking tariff hikes off the table.
Today Bloomberg reported that the US looks to add a currency pact into the interim deal . Supposedly such a pact had been agreed to before the talks broke down and including it in an interim deal might remove one (of many) stones on the way to a broader deal eventually.
Comment: We stick to our view that there is a 60% probability of an interim trade deal. As a minimum, such a deal would include China buying agricultural goods and the US taking tariff hikes off the table again. As we've argued in past weeks, both sides would have an interest in that, see for example US-China Trade - 60% probability of an interim deal , 2 October 2019. The two sides will try to get other things into a deal but it remains to be seen if they can agree on this. The developments have shown again that China separates the trade war track from the confrontations in all the other areas like tech, Hong Kong, NBA etc. The ceasefire between Trump and Xi in December 2018 was also made only a couple of days after the Huawei CFO was arrested in Canada on request by the US.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.