Market Intelligence In Depth: US and China up Geopolitical Pressure, Inch Towards Deal

Talks progress despite geopolitical posturing in Europe and the Pacific

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This is a highlight from one of the daily global markets briefings Predata sends to financial markets clients each morning. To learn more about becoming a Predata client, click here.

Geopolitical posturing on both sides of the globe has upped the pressure on trade negotiators, as Beijing and Washington appear to be inching slowly towards a deal. A relatively harmonious trade settlement would reassure global markets still spooked by the recent yield curve inversion and global growth concerns, especially in Asia, as we noted in our Weekly Foreword earlier this morning.

In Europe, Xi Jinping’s series of state visits has already made a significant mark. Italy’s government formally endorsed the Belt and Road Initiative–the first G7 nation to do so–and the French government signed a series of bilateral sectoral agreements. The visits sent worldwide interest in the Belt and Road Initiative, and other elements of Chinese economic foreign policy, to their highest level since the 1st Belt and Road Forum in May 2017. Beijing will host a second edition of the Forum next month to cement support for its foreign investment and partnership efforts.

OBOR Interest

In the Pacific, US Navy and Coast Guard vessels transited the Taiwan Strait on Monday in a freedom of navigation mission. Further provocative activity around the East and South China Seas may be likely over the next few weeks, according to Predata anticipatory signals. Taiwanese President Tsai Ing-wen–who has gone further than most of her predecessors in asserting Taiwan’s independence from mainland China–is due to visit Hawaii tomorrow. Beijing has already formally opposed the visit.  

ESCS Risk

All the while, trade talks continue. A US delegation led by Treasury Secretary Steve Mnuchin and Trade Representative Robert Lighthizer travelled to Beijing this week, which will be followed by a reciprocal visit to Washington lead by Chiense Vice Premier Liu He. Predata’s signal anticipating escalations in the US-China trade conflict has dropped off considerably over the past two weeks, a sign that despite the geopolitical posturing, the current negotiating effort may result in a deal.

TWRisk