China: Xi-Trump summit delayed, Q1data a mixed bag

Xi-Trump summit in April at the earliest, according to sources.
Data for Jan/Feb was mixed but leading indicators still point to recovery.
Stock markets take a breather as regulator sends warning.

Danske Research Team Danske Bank A/S

Xi-Trump summit delayed to at least April

Sources close to the trade negotiations said on Thursday that a summit between Donald Trump and Xi Jinping would take place in April at the earliest. According to the article, Xi's staff is no longer planning for a flight to Florida after a planned visit to France and Italy at the end of this month.

Speaking on the trade negotiations on Wednesday, US President Donald Trump told reporters that "things are going along very well" and "I think the deal is going to be made... but we'll see what happens". However, he also stressed that he is in no hurry to make a deal, referring to those accusing him of rushing a deal, see Reuters 13 March. Trump also told reporters that he preferred to finish the deal at a summit with Xi but was also open to competing the deal beforehand and instead meet for signing the trade deal. Former economic adviser Gary Cohn said in an interview that Trump is ‘desperate' to sign a deal with China.

On Friday, the National People's Congress approved a new foreign investment law aimed at levelling the playing field for foreign companies and increasing protection of intellectual property rights, see SCMP, 15 March. This would come into effect on 1 January 2020. The law was first introduced as a draft in 2015 but in the past three months, it has been rushed through to accommodate US demands in the trade talks.

Comment: As we wrote last week, things are bound to get trickier at the end of such negotiations with so much at stake. It seems the US wants an enforcement mechanism in which they can re-impose tariffs on China if they believe China is not honouring the deal, without China being allowed to retaliate. No Chinese president could sell such a deal domestically. China prefers an independent body such as the WTO to be the judge of any breach, which is a no-go for the US. A compromise needs to be found.

Xi will not agree to a summit unless a deal is more or less completed. Trump's comments that he could walk from a deal if it is not good enough has created anxiety on the Chinese side. Xi cannot risk giving Trump the honour of hosting a summit in his own resort and then come home without a signed agreement. We probably have to wait for trade talks to be more or less finished before a summit would be announced. This may take some time. Ultimately, we still firmly believe a deal will be made, though, as Trump needs a deal for his campaign for the 2020 Presidential elections, which kick off soon. Failure to reach a deal would lead to sharp declines in equities and China would stop buying soy beans, etc., which would hurt voters in important swing states. In our view, it is unlikely that Trump would choose that path.

Download The Full China Weekly Letter

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

EUR/USD climbs to two-week highs beyond 1.1900

EUR/USD is keeping its foot on the gas at the start of the week, reclaiming the 1.1900 barrier and above on Monday. The US Dollar remains on the back foot, with traders reluctant to step in ahead of Wednesday’s key January jobs report, allowing the pair to extend its upward grind for now.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold treads water around $5,000

Gold is trading in an inconclusive fashion around the key $5,000 mark on Monday week. Support is coming from fresh signs of further buying from the PBoC, while expectations that the Fed could turn more dovish, alongside concerns over its independence, keep the demand for the precious metal running.

Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure

Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Bitcoin, Ethereum, and Ripple prices consolidated on Monday after correcting by nearly 9%, 8%, and 10% in the previous week, respectively. BTC is hovering around $70,000, while ETH and XRP are facing rejection at key levels. Traders should be cautious: despite recent stabilization, upside recovery for these top three cryptocurrencies is capped as the broader trend remains bearish.