Uncertain US-China trade deescalates

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Uncertain US-China trade deescalates

Against the dollar, Thai baht on the previous trading day closed remarkably stronger around 30.6. Potentially viewed as a regional safe haven, the baht was increasingly demanded on mounting trade war.

US-China tensions momentarily deescalated after Chinese Vice Premier Liu He said that China was willing to resolve the trade disputes with the US via peaceful talks. Subsequently, President Trump claimed that China phoned and asked to revive negotiations although reportedly possibly not recognized by China. Risky asset prices and USD index then rebounded, while the yuan seemed stabilized around 7.15 per dollar after earlier hitting its 11-year lowest against the dollar.

UBS Wealth Management, overseeing USD 2.5 trillion for wealthy clients, has been turning bearish as underweighting stocks in its portfolios. This was owing to US-China reintroduced intensifications and prolonging trade uncertainties, which have amplified risks to the global economic expansion.

On international trade at the G7 summit in France, open and fair global trade and global economy stability were committed. For regulatory barrier simplification and international taxation modernization, the G7 leaders pledged to conclude with an agreement in 2020.

US durable goods orders, +2.1% mom in July, improved and toppled both the previous month and market expectations after being on a downward trend for several months.

PM Johnson said that Brexit renegotiations with the EU could be concluded until last minutes. The messier the Brexit is, the more adverse effects in the short run, such as business plan stalling, border disruption, food shortages, etc., will possibly be.

German business sentiment remained worsening. Its Ifo Business Climate Index has been declining to reach 94.3 in August, lowest since 2012. Beforehand, Germany’s preliminary economic growth in Q2 showed negativity qoq, while lowest since 2013 yoy. Its finalized figures will be released today.

Thailand’s manufacturing sector kept contracting. Its industrial production, revealed as -3.23% yoy in July, grew negatively for three months consecutively. This affirms the country’s slackening economy.

Moving around 30.57-30.61 his morning, USDTHB could be between 30.54-30.64 today.


US treasury yields bounce on US-China tension de-escalations

Thai benchmark government bond yield (LB28DA, 9.3 years) on the previous trading day was 1.46%, -7.53 bps. Meantime, the latest closed Thai and US 10-year bond yields were 1.47%, -7.7 bps, and 1.54%, +2 bps, respectively.

On US-China tension de-escalations, US treasury yields bounced. Yesterday, Thai government bond yields tumbled on earlier renewed US-China deterioration, but expected to tick higher today on better trade situations.

Spread between long- and short-dated yields: negativity implies a possible upcoming recession. US 10y3m: -47 bps, US 10y2y: +0 bps, Japan 10y2y: +5 bps, German 10y2y: +22.3. bps, UK 10y2y: +16.5, Thai 10y2y: +3.8 bps.

Thai benchmark government bond yield (LB28DA, 9.3 years) could be between 1.45-1.48% today.


Sources: Bangkokbiznews, BBC, Bloomberg, CNBC, CNN, Financial Times, ING, Investing.com, Reuters, South China Morning Post