Chinese Data And UK Brexit Start New Week

Overview: Mixed data from China and the anticipation of Prime Minister May's "Plan B" are the main talking points, while US stock and bond markets are closed today. Asia Pacific equities were higher, while European markets have failed to follow suit. Benchmark 10-year bond yields are mostly softer, with the on-the-run Japanese Government Bond yield dipping back into negative territory. The US dollar is narrowly mixed, gaining a little against the dollar-bloc currencies and sterling while slipping against the euro, yen, and Scandis. Most emerging market currencies are trading heavier, but the euro is helping the central and eastern European currencies steady. Oil prices edged higher initially but have reversed to trade marginally lower.  

Asia Pacific

The uptick in China's December retail sales and industrial output seems to offset the slightly disappointing Q4 GDP figures. Retail sales rose 8.2% year-over-year, up from 8.1%. Economists had forecast an unchanged report. Industrial output rose 5.7% year-over-year in December. The Bloomberg survey showed a median forecast for a 5.3% pace after 5.4% in November. Fixed asset investment was unchanged at 5.9%. Economists had anticipated a small increase. Fourth quarter GDP slowed to 6.4% from 6.5%, the slowest pace since 2009. The main idea is that, to the extent that one is willing to take the data at face value, the gains in retail sales and industrial production suggests that growth is finding a bottom and that the various efforts to stimulate the economy may have begun working.  

Last week, press reports played up the debate within the Trump Administration over tactics ahead of China's Vice Premier's visit next week to Washington. The idea that the Treasury was in some way sympathetic to easing tariff pressure on China was quickly and now repeatedly denied. Today's reports suggest, as we suspected, there has been little progress in what is a key issue for the Trump Administration and that is intellectual property rights, not tariff barriers to trade per se. Separately, but related, the Administration is reportedly drafting measures that would impose restrictions on state-owned Chinese electronic firms operating in the US. It does not mention Huawei or ZTE by name.  

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Read more by Marc on his site Marc to Market.

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