Changing Sino-US trade rhetoric through the week saw US Treasuries rollercoaster, the yield on the 10-year eventually closed 11bps lower at 1.83%. Last week, China's Ministry of Commerce, Gao Feng stated: "If the two sides reach a phase-one agreement, the degree of the tariffs removed should sufficiently reflect the significance of the phase-one agreement". Brent oil is, this morning, holding its gains following “constructive discussions” over the weekend as the two sides move to finalise a “skinny” “Phase 1” deal by year-end.
Staying with China, economic data prints for October broadly surprised to the downside, with the industrial sector and investment and consumption readings all weaker than expected. In a bid to drive investment, China’s State Council said it would cut the minimum capital requirement for a number of infrastructure projects by 5% to 20%. In terms of infrastructure financing on buildings, capital could be raised through equity, but this would be limited to 50%.
US data prints released last week were also mixed with the likes of Empire Manufacturing falling to 2.9 from 4 and from expectations from 6. The Fed’s favoured retail sales control group came in-line with expectations and was positive, however, industrial production fell 0.8% mom in October, surprising to the downside. The DXY index slid below 98 by close on Friday. All the while, the US impeachment enquiry testimonies were conducted; eight more witnesses are expected to testify. Across the pond, the election campaigning continued in the UK with the manifestos published over the weekend and this week we will see ITV host a head-to-head debate between PM Johnson and Labour’s Jeremy Corbyn on Tuesday.
A relatively quiet week ahead for data kicked-off this morning with UK Rightmove house prices, which shrank in November, US housing stats out on Tuesday will also be of interest. Japan’s trade data due on Wednesday, Euro-area consumer confidence on Thursday, Friday’s University of Michigan sentiment, and Kansas City Fed manufacturing activity readings will be followed closely. The FOMC minutes out on Wednesday will unlikely divulge anything new, what could be of interest is the two-day World Business Forum, where ex-Fed chair Janet Yellen will speak on the US economy. Meanwhile, the ECB will publish its minutes for the October meeting and the OECD economic outlook is due out by the end of the week.