May Survives But Its Draghi's Day

Overview: There is a sense of optimism among investors today that may be tested as the session progresses. News that China may reconsider its "Made in China 2025" initiative as an apparent concession to the US while reports suggest it has bought 1.5-2.0 mln tons of soy is easing trade tension fears. UK Prime Minister May survived a vote of confidence within her party and sterling's recovery has been extended. Italy offers a 2.04% budget deficit to the EU. The improvement from the initial 2.4% projection may be enough to prevent excessive deficit procedures. The 10-year Italian bond yield is at three-month lows today slipping below 2.90%. Equities in the Asia Pacific region gained for the first back-to-back advance this month. European shares are struggling to extend its two-day advance. The dollar softer against most major and emerging market currencies. 

Asia Pacific

Now that the momentum of US tariffs against has been broken, Chinese officials appear willing to make compromises to try to avoid their resumption next March when the 90-day freeze expires. The 1.5-2.0 mln ton purchase of US soy is symbolic. After rising about 10 cents over the past couple of sessions to about $9.20 a bushel, January soy is trading a little softer today. Reports suggest Chinese officials are considering pushing out the "Made in China 2025"  initiative out another decade, while it has already de-emphasized it. China also appears to be moving to unwind the retaliatory tariff on auto exports from the US. More concessions are likely from next week's annual economic policy meeting.  

Japan's quarterly Tankan survey will be reported tomorrow. Although the economy seems to be recovering from the Q3 contraction, the survey is not expected to show much improvement. That said, sentiment among the large manufacturing has softened in each of the first three quarters of the year.  The Bank of Japan meets at the end of next week and is widely expected to leave policy settings unchanged.  

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Read more by Marc on his site Marc to Market.

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