· China’s yuan hit an 11-year low in onshore trade and tumbled to a record low in offshore trade after a sharp re-escalation in the U.S.-China trade war whacked investor confidence and darkened the global economic outlook.
The yen, often bought in times of uncertainty as a safe haven, pared early gains versus the dollar due to Japanese importers’ selling, but remained firmer against other currencies in a sign of waning risk appetites.
In China’s onshore market, the yuan fell to 7.1500 per dollar, the lowest since February 2008. In the offshore market, the yuan slid to 7.1850 yuan, the weakest since international trading in the currency began in 2010.
In Asian trading, the benchmark 10-year Treasury yield fell below 1.475% to reach their lowest in more than three years. Yields on 2-year debt fell to 1.465%.
The yen surged early in Asian trading to 104.46 per dollar, the highest since a flash crash this January, but then pared gains to be only a tad higher at 105.26.
The yen will next target 104.10 per dollar, which is the high it reached during a flash crash on Jan. 3 that roiled financial markets, Daiwa Securities’ Ishizuki said.
· U.S. Treasury yields slipped lower on Monday as investors seek refuge following a turbulent weekend in the U.S.-China trade war.
At around 4:50 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was trading down at 1.449%, while the yield on the 30-year Treasury bond fell to 1.942%.
The critical spread between the 10-year and 2-year yield will be in focus once again, having inverted multiple times through Friday’s session as the trade war intensified. The inversion of the 2-year/10-year yield curve is a widely watched signal of oncoming recession. The 2-year note was trading at around 1.463% Monday morning.
· President Donald Trump said on Monday that China is ready to come back to the negotiating table and the two countries will start talking very seriously.
Speaking at the G-7 summit in Biarritz in France, Trump praised Chinese President Xi Jinping and welcomed his desire for a deal and for calm
· U.S. President Donald Trump said China has asked to re-start trade talks, hours after Beijing’s top negotiator publicly called for calm in response to a weekend of tit-for-tat tariff increases that sent global stocks plunging.
The president said the U.S. would accept the Chinese invitation and return to the negotiations. Earlier, China’s top trade negotiator, Vice Premier Liu He, had used an appearance in China to call for a de-escalation in tensions.
· China is willing to resolve its trade dispute with the United States through “calm” negotiations and resolutely opposes the escalation of the conflict, Vice Premier Liu He, who has been leading the talks with Washington, said on Monday.
· American Treasury Secretary Steven Mnuchin doubled down on the White House’s latest punch in the U.S.-China trade war by calling out Beijing for unfair trade practices.
“We do not have free trade with them,” Mnuchin said Sunday on the sidelines of the G-7 meeting in France. “It’s a one way street: They have free entrance into our markets, our investments, our companies and we do not have the same thing there. That’s the only reason why we are in this situation with China. If China would agree to a fair and balanced relationship, we would sign that deal in a second,” he added.
· The potential of a recession in the U.S. is now “the biggest concern” as Washington and Beijing continued to up the ante in their protracted trade fight, according to a strategist at Standard Chartered Private Bank.
The probability of a U.S. recession in the next 12 months has risen from 25% to “as high as 40%,” said Clive McDonnell, head of equity strategy at the bank.
· The escalation in the U.S.-China tariff fight over the weekend is unlikely to derail trade negotiations between the two economic giants, an expert from the Center for Strategic and International Studies said Monday.
That’s because neither the U.S. nor China wants to be seen as the party that caused talks to break down — which will have repercussions on their political image, said William Reinsch, the think tank’s senior advisor and Scholl Chair in international business.
· The United States and Japan agreed in principle on Sunday to core elements of a trade deal that U.S. President Donald Trump and Prime Minister Shinzo Abe said they hoped to sign in New York next month.
U.S. Trade Representative Robert Lighthizer said the deal covered agriculture, industrial tariffs and digital trade. Auto tariffs would remain unchanged.
Trump said Japan had agreed to buy excess U.S. corn that is burdening farmers as a result of the tariff dispute between Washington and Beijing. Abe referred to a potential purchase of the corn and said it would be handled by the private sector.
· Trump said that he would have a major trade deal with U.K. upon leaving the European Union.
“We’re are having very good trade talks between the U.K. and ourselves. We’re going to do a very big trade deal, bigger than we’ve ever had with the UK,” Trump said. “At some point, they won’t have the obstacle of, they won’t have the anchor around their ankle, because that’s what they had. So, we’re going to have some very good trade talks and big numbers,” he said without adding any more detail on a potential deal.
· Oil prices fell on Monday, pushing U.S. crude to the lowest in more than two weeks, as an intensifying trade war between the U.S. and China undermined confidence in global economic growth.
Brent crude was down 52 cents, or 0.9%, at $58.82 a barrel by 0645 GMT, having earlier touched $58.24, the lowest since Aug. 15.
U.S. oil was down 62 cents, or 1.1%, at $53.55 a barrel, having earlier fallen to $52.96, the lowest since Aug. 9.
Concerns about an economic slowdown are being fanned by a ratcheting up of trade tensions between the United States and China.
U.S. Federal Reserve chair Jerome Powell told an annual economic symposium in Jackson Hole, Wyoming that the U.S. economy is in a “favorable place” and the Federal Reserve will “act as appropriate” to keep the current economic expansion on track.”
The remarks gave few clues about whether the central bank will cut interest rates at its next meeting.
Reference: CNBC, Reuters, Bloomberg
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