The weekend press reports on the China and US trade spat, Trump's lashing out at Mexico, Trump's wading in on Brexit and general progress related to Brexit, U.S. Iran relations and European political developments taking the spotlight.
China puts out a White Paper on Sino/US trade spat – BBG
Bloomberg ran a report titled, China Demands Respect and Blames U.S. for Trade Talks Flop. There is some promising talk in the article of China’s government sounding willing to work with the U.S. to end an escalating trade war, but notes that China blames President Donald Trump’s administration for the collapse in talks and won’t be pressured into concessions. China wrote a whitepaper proclaiming that the trade war is hurting both sides. “It is foreseeable that the latest U.S. tariff hikes on China, far from resolving issues, will only make things worse for all sides,” according to the white paper. The Chinese white paper said at the most recent talks in May, the U.S. used “intimidation and coercion” and “persisted with exorbitant demands, maintained the additional tariffs imposed since the friction began, and insisted on including mandatory requirements concerning China’s sovereign affairs.”
“The Chinese government rejects the idea that threats of a trade war and continuous tariff hikes can ever help resolve trade and economic issues,” according to the white paper.
Instead, Beijing suggested, “the two countries should push forward consultations based on good faith and credibility in a bid to address issues, narrow differences, expand common interests, and jointly safeguard global economic stability and development.”
Mexican president hints at migration concessions to avoid Trump tariffs – CNBC
Further to the end of last week's risk off state of play that came about following Trump's Mexico tariff announcements in early Asia on Friday, CNBC wrote a piece noting that Mexico’s president on Saturday hinted his country could tighten migration controls to defuse U.S. President Donald Trump’s threat to impose tariffs on Mexican goods. This news came after a news conference in the Gulf of Mexico port of Veracruz, where President Andres Manuel Lopez Obrador said Mexico could be ready to step up such measures in order to reach a deal with the United States. Mexico’s president said he expected “good results” from talks planned in Washington next week – Risk positive.
Trump weighs in on Brexit – RTRS
Reuters reported on U.S. President Donald Trump who heads to Britain this week. The article notes an interview with the Sunday Times newspaper, where Trump said the next British leader should send arch-Brexiteer Nigel Farage to conduct talks with the EU. Britain must leave the EU this year, Trump said. “They’ve got to get it done,” he said. “They have got to get the deal closed.” “If they don’t get what they want, I would walk away. If you don’t get a fair deal, you walk away. “I like Nigel a lot. He has a lot to offer – he is a very smart person,” Trump said. “They won’t bring him in but think how well they would do if they did. They just haven’t figured that out yet.” On the Brexit divorce bill, Trump said: “If I were them, I wouldn’t pay 50 billion dollars. That is a tremendous number.”
Bank of England's Ramsden sees weak growth in mid-2019 – RTRS
Reuters reports on Britain’s economy likely to see slow growth through the middle of this year before picking up towards the end of 2019, citing Bank of England (BoE) Deputy Governor Dave Ramsden saying in an interview published on Saturday:
“Given where the labour market is, given that real incomes are beginning to see some pick-up, growth might be weak in the middle of this year and then start to pick up,” Ramsden told Scotland’s Press and Journal newspaper during a trip to Inverness.
“Businesses might be more cautious to start investing again at the kind of pace that we are forecasting, because we see investment picking up to 5% or so next year. It’s currently falling on a year earlier,” he told the newspaper.
The BoE forecast in early May that the economy would grow by 1.5% this year and 1.6% in 2020 if Brexit goes smoothly.
Quarterly growth was a robust 0.5% in the first three months of 2019, but the BoE predicts this will drop to 0.2% during the current quarter as the temporary boost from pre-Brexit stockpiling fades.
Merkel Coalition Party Leader Quits, Rattling Ruling Bloc – BBG
Across The Channel and over to Germany, Bloomberg reported on the leader of German Chancellor Angela Merkel’s junior coalition partner stepping down in a surprise move that puts into question the survival of the government itself.
"Andrea Nahles, head of the Social Democratic Party, said she will resign as chief and parliamentary caucus leader after losing the rank and file’s backing. The party suffered a devastating defeat in the European Parliament elections last week. “The necessary support for exercising my duties is no longer there,” she said in an emailed statement."
"The SPD choice for a new leader in coming weeks is expected to be linked to a debate about the future of the grand coalition."
The Middle East and the price of oil – RTRS/BBG
Oil prices have plummeted to a key technical level on the charts, ending just a stone throw away from the 200 W EMA target at 52.40. Another dollar lower, the price will have exceeded the 38.20% Fibo of the Dec lows to recent highs at $51.64. WTI is down nearly 17% since the start of May. Global demand is seen to be falling, but Iran would appear to be at the heart of the recent slide of oil prices.
"Brian Hook, Pompeo's point man on the Iran file, noted that countries that have not breached the previously agreed upon waiver allowances will not be sanctioned. While we suspect that Hook's comments were meant as a signal to key EU countries which have accrued such an allowance, as the Administration officials target the special mechanism created to trade with Iran, the announcement added fuel to the flames and sent crude prices tumbling," analysts at TD Securities noted.
However, in recent weeks, the US was said to be sending extra forces to the Middle East to respond to an Iranian threat and a report by Reuters from the weekend noted that Iran has warned that any clash in the Gulf would push oil prices above $100. The articles writes, "Yahya Rahim Safavi, a top military aide to Khamenei, said: “The Americans are fully aware that their military forces (in the region) are within Iran’s missile range and all U.S. and foreigners’ navy in the Persian Gulf are within the range of land-to-sea missiles of the Revolutionary Guards….The first bullet fired in the Persian Gulf will push oil prices above $100. This would be unbearable to America, Europe and the U.S. allies like Japan and South Korea,” Rahim Safavi was quoted as saying by Fars news agency."
The article goes on to note Trump's comments from last week where he was hopeful Iran would come to negotiating table to reach a new deal. On the weekend, Bloomberg picked up on Iranian President Hassan Rouhani’s expression of willingness to negotiate with the U.S and U.S. Secretary of State Mike Pompeo's response, “We’re prepared to engage in a conversation with no preconditions,” he said. “But the American effort to fundamentally reverse the malign activity of the Islamic Republic, this revolutionary force, is going to continue.”
Iranian Foreign Minister Mohammad Javad Zarif said, “Threats against Iran never work." “Never threaten an Iranian, try respect, that may work.” What’s more, he said, the U.S. can’t be relied on to keep its word. “People think twice before they talk to the United States because they know that what they agree to today may not hold tomorrow,” Zarif said.
There seems no end in sight to the Iran risk for oil markets and a recent surge in crude pipeline capacity, unlocking additional production, is likely to keep the pressure on the black gold. Meanwhile, in more recent news, the conflict in Syria grabbed the headlines, with Reuters reporting on missile attacks on a Syrian T4 military airbase in the province of Homs, a base used by Iranian forces. Israeli missiles targeted the T4 air base in Homs province in an attack on Sunday night, Syrian state media said citing a military source. “Our air defence systems thwarted an Israeli aggression and brought down a number of missiles that were targeting the T4 airport,” cited the military source as saying. The air defences hit one of the “attacking planes and forced the rest to leave” Syria’s air space, it added.