Xi to visit White House ‘soon’, data confirm recovery

US and China aim for trade deal in late May
March data better than expected but downside risk to April data
African swine fever crisis could give significant boost to inflation
Xi addresses concerns over Belt and Road Initiative at the Belt and Road Forum

Allan von Mehren Danske Bank A/S

Aiming for a trade deal in late May

US President Donald Trump said on Thursday that Chinese President Xi Jinping will come to the White House soon. A high-level US delegation is set to go to Beijing on Tuesday and the following week Chinese top negotiators are set to go to Washington with the goal of closing a deal and announcing a signing summit between Trump and Xi, see Bloomberg , 24 April.

Comment. Trump's message suggest we are moving closer to a deal. We expect it to become a reality at a Trump-Xi summit in late May or early June.

More recovery signals but risk of disappointments in April data

Another batch of positive data for March was released just before Easter. Industrial production, retail sales, property prices and home sales all improved (see charts). Q1 GDP beat expectations with an increase of 6.4% y/y (consensus 6.3% y/y) and several banks followed up by revising up growth forecasts for 2019 to around 6.4% from 6.2-6.3%.

Comment. It is encouraging to see more signs that the worst is behind us in the Chinese economy. However, we should brace ourselves for some slip back in April as the March data are likely somewhat distorted by the Chinese New Year. The rise in industrial production of 8.5%, for example, seems too good to be true. Next week the April PMI manufacturing will give more clues. We see downside risk to the Caixin PMI manufacturing, which has risen very fast in recent months. However, we still believe that China has started a moderate recovery driven by easing trade tensions and economic stimulus. We may not see further reductions in the Reserve Requirement Ratio but we expect targeted lending measures to be stepped up to increase credit availability for small and medium-sized private companies.

African swine fever crisis intensifies

The African swine fever in China is starting to have a bigger effect on pork output pushing up prices. According to the Ministry of Agriculture and Rural Affairs the impact on China's pig industry has been 'very serious' with stocks shrinking and prices expected to rise to an all-time high later in 2019, see SCMP 23 April. The number of mother pigs declined 21% in March from a year earlier and in the first week of April pork prices increased 36% from a year earlier (up from a rise of 2.1% y/y in the first week of March).

China had 375 million pigs and piglets at the end of March, a drop of 53 million from 428 million in December. Some estimates have suggested China could lose up to 200 million pigs during the epidemic, close to three times the pig population of the US. So far 129 cases of African swine fever have been reported but the fear is that the number is much higher due to underreporting at big pig farms.

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Allan von Mehren

Danske Bank A/S

EUR/USD stays defensive below 1.1900 as USD recovers

EUR/USD trades in negative territory for the third consecutive day, below 1.1900 in the European session on Thursday. A modest rebound in the US Dollar is weighing on the pair, despite an upbeat market mood. Traders keep an eye on the US weekly Initial Jobless Claims data for further trading impetus.

GBP/USD holds above 1.3600 after UK data dump

\GBP/USD moves little while holding above 1.3600 in the European session on Thursday, following the release of the UK Q4 preliminary GDP, which showed a 0.1% growth against a 0.2% increase expected. The UK industrial sector activity deteriorated in Decembert, keeping the downward pressure intact on the Pound Sterling.

Gold sticks to modest intraday losses as reduced March Fed rate cut bets underpin USD

Gold languishes near the lower end of its daily range heading into the European session on Thursday. The precious metal, however, lacks follow-through selling amid mixed cues and currently trades above the $5,050 level, well within striking distance of a nearly two-week low touched the previous day.

Cardano eyes short-term rebound as derivatives sentiment improves

Cardano (ADA) is trading at $0.257 at the time of writing on Thursday, after slipping more than 4% so far this week. Derivatives sentiment improves as ADA’s funding rates turn positive alongside rising long bets among traders.

A tale of two labour markets: Headline strength masks underlying weakness

Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.

Sonic Labs’ vertical integration fuels recovery in S token

Sonic, previously Fantom (FTM), is extending its recovery trade at $0.048 at the time of writing, after rebounding by over 12% the previous day. The recovery thesis’ strengths lie in the optimism surrounding Sonic Labs’ Wednesday announcement to shift to a vertically integrated model, aimed at boosting S token utility.