Markets Shrug-Off Trump's Attempt To Talk The Dollar Down

Overview: Comments by US President Trump over the weekend, complaining about the dollar's strength weighed on the greenback initially in Asia, but it quickly recovered. Reports of progress on a US-China trade deal helped lift the Shanghai Composite above the 3000-level for the first time since the middle of last year. Asian equities mostly rallied with China. Korea and Taiwan were notable exceptions after disappointing PMI data. European shares are moving higher, and the Dow Jones Stoxx 600 is up 0.5% to extend the advance for the third session. Bond yields are mostly firmer, though Moody's two-notch increase in Greece's rating to "B" with a stable outlook has spurred a bid. The 10-year yield is about five basis points lower at 3.60%, the lowest before the Great Financial Crisis. S&P cut Mexico's sovereign outlook to negative, and this has seen the peso shed about 0.5% today and is the weakest of the emerging market currencies. Signs that the Tory Party may have found some common ground is helping sterling recover from the two-day slippage seen at the end of last week. 

Asia Pacific

Reports suggest the US and China are nearing a trade deal. Of course, they are, however, there are not any fresh details. Yes, a deal would have to include the lifting tariffs and retaliatory tariffs to be meaningful, unlike the new NAFTA deal that left the steel and aluminum tariffs on national security grounds intact. China would buy more US agriculture, energy, autos, chemicals. However, if China's overall imports do not go up by as much, the US will simply displace other suppliers. This would be the 21st century equivalent of getting a 19th-century concession.  Instead of a Bund District, there is US soy rather than Brazilian soy.  

There is no sign of economic recovery in South Korea and Taiwan. South Korea's manufacturing PMI fell to 47.2 in February from 48.3 in January.  Taiwan's manufacturing PMI fell to 46.3 from 47.5.  Both currencies are a little softer on the day. Note that foreigners bought $4.2-$4.3 bln of both equity markets this year after net sellers last years. Note that although the US-North Korean talks broke down last week, the US has agreed to cease the large-scale war games with South Korea that antagonize the North.  At first, Trump said that North Korean's demands were why the talks ended, but over the weekend he linked his decision to the Congressional testimony of his former lawyer Cohen.  

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Read more by Marc on his site Marc to Market.

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