· The imminent signing of a preliminary Sino-U.S. trade deal helped Asian currencies rally on Monday, but sterling fell on fresh hints of a Bank of England rate cut.
The trade-exposed Chinese yuan CNY= and Australian dollar AUD=D3 each rose 0.3% to lead broad gains.
The yuan - the currency most attuned to Sino-U.S. trade developments - crossed the 6.9 per dollar mark to hit a fresh five-month high of 6.8959.
The Aussie hit a one-week high of $0.6919. The New Zealand dollar also climbed 0.2% to its strongest since Thursday at $.6650 and the euro EUR= was steady at $1.1128.
Elsewhere, the British pound GBP= fell 0.3% to $1.3037 and flirted with a two-week low after dovish comments from Bank of England policymaker Gertjan Vlieghe over the weekend.
· Businesses are concerned that President Trump’s “Phase 1” China trade deal, set to be signed on Wednesday, will not be followed by a more-substantial Phase 2, leaving a slew of tariffs in place for at least another year.
The concerns are being raised in part because of the difficult issues that would have to be resolved between Beijing and Washington to win a stage-two deal.
· Trump announced to great fanfare on New Year's eve that he would sign the "phase one" deal on Jan 15 in the White House.
MYSTERIOUS DETAILS
But it was not until Thursday that the Chinese Ministry of Commerce confirmed the visit of Vice Premier Liu He, who will be in Washington from Monday to Wednesday.
Details of the scope of the agreement have remained a mystery, however.
"The whole document will be released Wednesday," Larry Kudlow, director of the National Economic Council, told reporters on Friday.
· The U.S.-China trade fight dominated investors’ attention for much of 2019 — but that will likely be get overshadowed by tensions between the U.S. and Iran this year, a political risk consultant predicted on Monday.
“I actually think this (Iran) is going to be a more important issue for investors this year than China-U.S.,” said Alastair Newton, director of Alavan Business Advisory and a former British diplomat, told CNBC’s “Squawk Box Asia.”
He predicted there will be more Iranian retaliation this year, after Tehran fired missiles at Iraqi bases housing U.S. troops last week — a move seen in retaliation to the U.S. killing of top Iranian general Qasem Soleimani.
· There have been signs that some risks in the global economy are receding, allowing businesses to once again plan for the long term, said Bill Winters, chief executive of British bank Standard Chartered.
Winters pointed out on Monday that the U.S. and China have returned to “proper dialogue” to iron out their trade conflict, while disruption from pro-democracy protests in Hong Kong looked to be subsiding with early signs of tourists returning to the city.
But, “the good news is the state of the world is returning to something a little bit closer to normal,” he told CNBC’s “Street Signs Asia.”
· In view of analysts at National Bank of Canada, in the US, the release of December’s CPI data will be watched closely.
Key Quotes
“Gasoline prices rose at a steeper rate than usual in the month, a development that could translate into a 0.3% monthly increase of the headline index. This would allow the annual rate of inflation to rise three ticks to 2.4%. The core inflation rate, for its part, should have continued to be supported by the services sector, rising 0.2% m/m and 2.4% y/y.”
“We’ll also get December’s U.S. retail sales report. Remember that, since Thanksgiving occurred late last year, the increasingly popular Cyber Monday sale event was pushed into December. This should have helped boost consumer outlays in the final month of the year. We expect both headline and ex-auto sale to have mustered healthy gains.”
“Finally, the Fed will issue the latest edition of its Beige Book.”
· Auto sales in China fell 8.2% in 2019, data from the country’s biggest auto industry association showed on Monday.
Total auto sales in the world’s biggest auto market fell 0.1% in December from the same month a year earlier, the China Association of Automobile Manufacturers (CAAM) said.
Sales have now dropped for 18 months in a row.
· Beijing has been forthcoming about its long-term goals and is the “most serious threat” to the U.S., according to a former U.S. national security advisor.
“China has been very clear about what its long-term goals are strategically,” James Jones, who served as NSA under former President Barack Obama, told CNBC’s Hadley Gamble. “We need to take that very seriously.”
One Chinese goal is “total control of their own people using technology,” he said at the Atlantic Council Global Energy Forum in Abu Dhabi on Sunday. “They’re making astonishing progress to control every single citizen, whatever he or she does.”
“They’re giving grades for citizenship, which will affect their jobs you’re going to hold, the travel you can do and everything else,” he added, seeming to refer to China’s social credit system. “Where they’re moving is scary,” he said. “They obviously want to export that to other countries.”
· Hong Kong’s strengths as a global financial hub have not been undermined by months of pro-democracy protests, the Chinese-ruled city’s chief executive, Carrie Lam, said on Monday.
· Vietnam will enjoy the fastest economic growth in Southeast Asia in 2020, according to a new forecast from British multinational investment bank HSBC.
Vietnam has been a beneficiary of the China-U.S. trade war, enjoying a boost in services and exports that should drive economic growth to 7% this year, HSBC economist Yun Liu said last week. But she said the country remains vulnerable to economic risks including trade protection and inflation.
Inflation is increasing as swine flu forces up the price of pork, showing how a single product can weigh on the economic indicators of an entire nation of nearly 100 million people. Vietnam also fears rising inflation if simmering Middle East tensions continue to push up oil prices.
· Oil prices held steady on Monday as fears of conflict between the United States and Iran eased, with investors shifting their focus to this week’s scheduled signing of an initial U.S.-China trade deal, which could boost economic growth and demand.
Brent crude LCOc1 was up 1 cents at $64.99 per barrel at 0737 GMT, while West Texas Intermediate (WTI) crude CLc1 was up 5 cents at $59.09 a barrel from the previous session.
Reference: Reuters, CNBC, Channel News Asia, The Hill
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