David Fuller and Eoin Treacy's Comment of the Day
Category - China

    Trump Says China Talks Back on as Beijing Downplays Breakthrough

    This article from Bloomberg News highlights the ebb and flow of commentary on the trade war. Here is a section:

    “You can say we’re having very meaningful talks, much more meaningful than I would say at any time frankly,” Trump said while meeting with German Chancellor Angela Merkel on Monday. “Maybe I’m wrong but we’re in a stronger position now to do a deal, a fair deal for everyone,” he added.

    Still, a spokesman for China’s foreign ministry wasn’t able to immediately confirm the details of the phone calls on Monday. Later, Hu Xijin, editor-in-chief of China’s Global Times newspaper, said in a tweet that top trade negotiators hadn’t spoken by phone in recent days and that Trump was exaggerating the significance of the trade contacts.

    Trump later, at a separate bilateral meeting, insisted that calls were had at the highest level and was not aware that China was disputing them. U.S. Treasury Secretary Steven Mnuchin, also in Biarritz, said "there were discussions that went back and forth and let’s just leave it at that.”

    Read entire article

    Powell Says Economy in Favorable Place, Faces Significant Risks

    This article by Craig Torres and Rich Miller for Bloomberg may be of interest to subscribers. Here is a section:

    “Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Powell said in the text of his remarks Friday to central bankers gathered at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. “We will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.”

    Read entire article

    Hong Kong Retail Sales Plunge in August, Shop Association Says

    This article by Cathy Chan for Bloomberg may be of interest to subscribers. Here is a section:

    Most Hong Kong retailers have seen sales drop more than 50% in August, according to the city’s Retail Management Association, as the ongoing political protests take a toll on business and the economy.

    The association has urged landlords in the city to halve rents for six months to help tenants overcome difficult times, and has called on the government to provide relief measures to retailers, according to a press release. Retailers are facing large cash flow pressures and a few of them will cut jobs or even shut down if the situation continues to worsen, it said.

    The release didn’t explain what period it was comparing August’s sales with. Hong Kong’s government expects the city’s businesses to continue to suffer this year. The value of retail sales dropped 6.7% in June from a year earlier, the fifth straight month of declines, while the overall economy contracted in the three months through June from the first quarter. Embattled Chief Executive Carrie Lam said earlier this month that she saw “no room for optimism” for the economy this year.

    Read entire article

    Weaker Yuan Tests China's Ability to Prevent Capital Flight

    This article by Steven Russolillo for the Wall Street Journal may be of interest to subscribers. Here is a section: 

    Any further selloff could also create problems for Chinese property developers and other corporate borrowers who have borrowed heavily overseas, since their earnings are largely in yuan while their international borrowings are mostly in dollars.

    Chinese companies had nearly $900 billion of dollar-denominated debt securities outstanding at the end of March, nearly three times the amount five years ago, according to data from the Bank for International Settlements.

    Despite Beijing’s strict capital controls, China could experience capital flight if the yuan weakens further, some observers say.

    Louis Kuijs, head of Asia economics at Oxford Economics, said policy makers wouldn’t be comfortable with a major weakening of the yuan, given concerns about triggering large outflows.

    “People in China tend to take weakening of the currency as a harbinger of more such weakening to come,” he said. “That is a reason for some to shift money abroad.”

    Read entire article

    Bridgewater's Ray Dalio Discusses the Impact of China's Growth on the World Economy

    This is a fascinating interview where Ray Dalio discusses the merits of betting on China.

    "Trappedâ"

    Thanks to a subscriber for this report from Jeffrey Saut which may be of interest. Here is a section:

    In 55 years of observing markets, we have NEVER seen such a downside capitulation as October 2008; and, we have believed we are in the biggest secular bull market of my lifetime!  This morning Chinese Foreign Ministry spokeswoman Hau Chunving said, “China will not accept any kind of extreme exertion of pressure, intimidation or blackmail. Neither will China give in an inch on major issues of principle.  Now it's time for Washington to show sincerity and demonstrate to the world that the US is still a reliable partner that can carry out negotiations.”  And with that the renminbi is at decade lows versus most currencies.  Such action has the preopening S&P 500 futures off some 40-points . . . Good Grief!

    Read entire article

    China's Yuan Tumbles Past 7 Per Dollar for First Time Since 2008

    This article by Tian Chen and Sofia Horta e Costa for Bloomberg may be of interest to subscribers. Here is a section:

    The yuan declined 0.9% in mainland trading last week, its biggest loss since mid-May, after President Donald Trump abruptly escalated the trade war with new tariffs on Chinese goods. Beijing pledged to respond if the U.S. goes ahead with a plan to impose a 10% tariff on a further $300 billion in Chinese
    imports.

    “It appears that the tariffs hike suggests the return of tit-for-tat moves and a suspension of trade talks, and the PBOC sees no need to keep the yuan stable in the near term,” said Ken Cheung, a senior currency strategist at Mizuho Bank Ltd. The tumble exacerbated losses in Asia’s financial markets.

    Read entire article

    Japan-South Korea Feud Boils Over Amid Trade Actions, Protests

    This article by Isabel Reynolds and Sam Kim for Bloomberg may be of interest to subscribers. Here is a section:

    South Korean President Moon Jae-in called Japan “reckless” in a national address Friday and his country planned to cross its neighbor off a preferred-trade list. The move came hours after Japanese Prime Minister Shinzo Abe’s cabinet removed South Korea from its list of trusted export destinations.

    U.S. Secretary of State Michael Pompeo met his counterparts from both countries Friday, but the dispute, which simmered for months as the Trump administration sat on the sidelines, looks set to worsen amid protests, boycotts and economic warnings. “By bringing economic sanctions, they’ve really escalated it to another level,” said Robert Dujarric, director of the Institute of Contemporary Asian Studies, Temple University, Japan. “This isn’t going to make South Korea cave in. If anything, it heightens South Korean nationalism. It makes it harder to de-escalate and harder to have a ‘united front’
    against China.”

    Read entire article

    Email of the day - on lead indicators in this cycle:

    Hope all is well.

     I had a question about the comment you made at the end of your video today. You mentioned that the indicator that we should focus on which will lead to this current cycle unwinding is Private equity and the success of their investments, plus on government debt and the deficits they are building.

    Are you able to expand on what we can track (tangibly) for these 2 issues?

    Thanks v much

    Read entire article

    China: We Won't Use Nuclear Weapons First in a War

    This article by David Axe for the NationalInterest.org may be of interest. Here is a section:

    China has reaffirmed its policy of never being the first in a conflict to use nuclear weapons. Experts refer to this policy as “no first use,” or NFU.

    The NFU policy reaffirmation, contained in Beijing’s July 2019 strategic white paper, surprised some observers who expected a more expansive and aggressive nuclear posture from the rising power.

    Read entire article