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 weakens as US jobs data trims Fed rate cut bets

The EUR/USD pair trades in negative territory for the third consecutive day near 1.1860 during the early European session on Thursday. Traders will keep an eye on the US weekly Initial Jobless Claims data. On Friday, the attention will shift to the US Consumer Price Index inflation report.

GBP/USD bullish outlook prevails above 1.3600, UK GDP data looms

The GBP/USD pair gains ground near 1.3635, snapping the two-day losing streak during the early European session on Thursday. The preliminary reading of UK Gross Domestic Product for the fourth quarter will be closely watched later on Thursday. The UK economy is estimated to grow 0.2% QoQ in Q4, versus 0.1% in Q1.

Gold remains on the defensive below two-week top; lacks bearish conviction amid mixed cues

Gold sticks to modest intraday losses through the Asian session on Thursday, though it lacks follow-through selling and remains close to a nearly two-week high, touched the previous day. The commodity currently trades above the $5,070 level, down just over 0.20% for the day, amid mixed cues.

UK GDP set to post weak growth as markets rise bets on March rate cut

Markets will be watching closely on Thursday, when the United Kingdom’s Office for National Statistics will release the advance estimate of Q4 Gross Domestic Product. If the data land in line with consensus, the UK economy would have continued to grow at an annualised pace of 1.2%, compared with 1.3% recorded the previous year.

The market trades the path not the past

The payroll number did not just beat. It reset the tone. 130,000 vs. 65,000 expected, with a 35,000 whisper. 79 of 80 economists leaning the wrong way. Unemployment and underemployment are edging lower. For all the statistical fog around birth-death adjustments and seasonal quirks, the core message was unmistakable. The labour market is not cracking.

XRP sell-off deepens amid weak retail interest, risk-off sentiment

Ripple (XRP) is edging lower around $1.36 at the time of writing on Wednesday, weighed down by low retail interest and macroeconomic uncertainty, which is accelerating risk-off sentiment.