· The dollar gained and global equity markets rose on Friday on upbeat U.S. economic data while amicable messages from Chinese President Xi Jinping and U.S. President Donald Trump helped defuse tensions over the prolonged U.S.-Sino trade war.
Government bond yields mostly rose as U.S. manufacturing output accelerated in November to its fastest pace in seven months and a survey of purchasing managers showed services activity also picked up more than expected.
The dollar index .DXY, which compares the dollar against six major currencies, was up 0.27% at 98.256.
The euro fell 0.32% against the greenback after a survey showed euro zone business growth almost ground to a halt this month, with IHS Markit’s flash November composite Purchasing Managers’ Index sliding closer to the 50 mark separating growth from contraction.
IHS Markit’s final Purchasing Managers’ index readings also showed German business conditions waned further.
· U.S. Treasury yields were mixed on Friday in choppy trading, as data showing a pickup in manufacturing and services activity was counterbalanced by persistent uncertainty related to trade negotiations with China. U.S. short-term yields edged higher, benefiting from strong economic reports, while those on long-term debt were flat to slightly lower.
The upcoming Hong Kong elections over the weekend and a U.S. Congress bill that supports the protesters are adding to the trade tension. In afternoon trading, U.S. 10-year note yields were unchanged at 1.772%. Yields on 30-year bonds, on the other hand, were lower at 2.221%, from Thursday’s 2.231%. On the short end of the curve, U.S. two-year yields rose to 1.627%, from 1.605% on Thursday.
· Mixed messages on the U.S.-China trade deal this week kept investors from taking on any large directional positions ahead of next week’s Thanksgiving holiday.
Chinese President Xi Jinping said Beijing wants to work out a deal with Washington and has been trying to avoid a trade war - but is not afraid to retaliate when necessary.
A senior Chinese diplomat urged the United States to compromise in order to develop stable relations between the countries, saying that some U.S. politicians were trying to push the countries into confrontation.
· An ambitious “phase two” trade deal between the United States and China is looking less likely as the two countries struggle to strike a preliminary “phase one” agreement, according to U.S. and Beijing officials, lawmakers and trade experts.
In October, U.S. President Donald Trump said during a press conference with Chinese vice premier Liu He that he expected to quickly dive into a second phase of talks once “phase one” had been completed. The second phase would focus on a key U.S. complaint that China effectively steals U.S. intellectual property by forcing U.S. companies to transfer their technology to Chinese rivals, he said at the time.
But the November 2020 U.S. presidential election, the difficulties in getting the first-stage done, combined with the White House’s reluctance to work with other countries to pressure Beijing are dimming hopes for anything more ambitious in the near future, the sources said.
The 16-month trade war with China has thrown U.S. businesses and farmers into turmoil, disrupted global supply chains and been a drag on economies worldwide. Failure to address a key reason it was started is already raising questions about whether the sacrifice has been worth it. Meanwhile, many of Beijing’s trade practices that many free-market economies see as unfair remain unaddressed.
Officials in Beijing say they don’t anticipate sitting down to discuss a phase two deal before the U.S. election, in part because they want to wait to see if Trump wins a second term.
· The United States is the world’s biggest source of instability and its politicians are going around the world baselessly smearing China, the Chinese government’s top diplomat said on Saturday in a stinging attack at a G20 meeting in Japan.
Relations between the world’s two largest economies have nose-dived amid a bitter trade war - which they are trying to resolve - and arguments over human rights, Hong Kong and U.S. support for Chinese-claimed Taiwan.
· President Donald Trump on Friday accused a witness in the Democratic-led impeachment inquiry of lying and offered an explanation for his controversial use of his personal lawyer Rudy Giuliani on Ukraine policy, saying Giuliani’s crime-fighting abilities were needed to deal with a corrupt country.
· President Donald Trump said on Friday his administration would take a “good look” at a Hong Kong bill that passed the U.S. Congress nearly unanimously, as lawmakers awaited his decision on whether he would sign it into law or issue a veto.
· Hong Kong’s democrats romped to a landslide and symbolic majority in district council elections after residents turned out in record numbers on Sunday to vote following six months of anti-government protests in the embattled city.
In a rare weekend lull in the unrest that has roiled the financial hub, democratic candidates across the city of 7.4 million secured more than half of the 452 district council seats for the first time, against a strongly resourced and mobilized pro-establishment opposition.
When the results began trickling in after midnight, including upset wins for democrats against heavyweight pro-Beijing opponents, some voting centers erupted in loud cheers and chants of “Liberate Hong Kong. Revolution Now,” — a slogan of many protesters on the streets over the past half year.
Some winning candidates said the result was akin to a vote of support for the demonstrators, and could raise the heat on Hong Kong’s pro-Beijing chief executive, Carrie Lam, amid the city’s worst political crisis in decades.
· British Prime Minister Boris Johnson promised on Sunday “to get Brexit done”, with his Conservative Party making an election pledge to bring his deal to leave the European Union back to parliament before Christmas.
With Britain heading to the polls on Dec. 12, the governing Conservatives rolled out an election manifesto that promised more public sector spending and no further extensions to the protracted departure from the EU.
Johnson is the runaway favorite to win the election, according to opinion polls.
· Oil prices fell on Friday, pulling back from two-month highs as concern over U.S.-China trade talks overshadowed expectations of an extension to OPEC+ production cuts.
Brent crude futures shed 40 cents to settle at $63.57 a barrel. West Texas Intermediate (WTI) crude futures she 81 cents, or 1.4%, to settle at $57.77 a barrel.
Uncertainty over whether the United States and China will be able to reach a partial trade deal that would lift some pressure on the global economy kept a lid on prices.
Reference: CNBC, Reuters
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