Follow Paul Donovan

Strategic reversal?

| Posted by: Paul Donovan | Tags: Paul Donovan

  • US President Trump finally got around to calling Chinese President Xi, and in the course of the call indicated his support for the "one China" policy. That policy had not been repudiated, but the call represents a shift of emphasis in the wake of Chinese opposition.
  • The implicit change of emphasis matters to investors because if China can bring about a change like this, it may succeed in softening other US policy positions. Coming on a day when China's exports were reported as strengthening (calendar effects contributed to this), the signal from overnight events matters to investors.
  • There is a plethora of ECB speakers in the euro area today. The tensions within the ECB reflect the breadth of inflation experience (Spanish inflation at 3%, German inflation rising rapidly, Italian inflation at just 0.5%). Bundesbank President Weidmann's remarks will likely attract particular attention.
  • US import prices rarely attract much attention, but they do offer insight into the limited effect currency moves have on price competitiveness nowadays. The US Michigan opinion poll on consumer sentiment is likely to say more about politics than economics. UK industrial production figures are also due.