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Daily Briefing – Tuesday, August 22, 2017

Asia

An overnight skirmish (limited for now to fistfights and stone throwing) between Chinese and Indian soldiers in the Western Himalayas has foregrounded the growing tension between the two neighbors. Alongside the US’s threat to probe Chinese intellectual property infringements, Chinese and Indian newspapers this morning referred to the rapidly-developing trade war between the world’s 2 most populous nations. Central bankers are looking upon events with concern, since the two countries also have the 2 fastest growing economies in the world, and China fighting a trade war on 2 fronts could have dire effects upon the world economy. Meanwhile, the People’s Bank of China also announced that debt within the nation’s shadow banking system has contracted for the first time in 9 months. However, Chinese banks are expected to slow down lending in the 2nd half of the year, having already exhausted most of their credit quota.

 

US

US equities managed to par back some losses, closing slightly up on Monday on weak trading, as tensions with North Korea once again escalate and Trump ensures the MIC continued military activity in Afghanistan. On Thursday, the world’s central bankers will be meeting at the US Federal Reserve’s annual Jackson Hole summit, where all eyes will be on FED head Janet Yellen to clarify her intentions regarding a December interest rate hike.

 

Europe

European indexes closed in the red yesterday, led by the Eurostoxx (-71%). The least affected was the FTSE (-0.07%), which reacted primarily to geo-political tensions. The Euro and Pound remained relatively flat ahead of ECB Pres Draghi’s expected dovish statements at Jackson Hole. Meanwhile, Brexit talks have been delayed as sides discuss the UK’s positions on customs arrangements, which EU officials have termed “premature”. Yesterday’s Buba report cast a rosy eye on German growth projections and this morning’s Swiss trade surplus shows an impressive increase to 3.5bn CHF

 

Commodities

Gold yesterday aimed to regain its 1300 foothold as US-NK tensions once again flared amidst US-SK military exercises. This is the metal’s 5th week of rises in a row, while copper prices are at a 3-year high, silver is up 0.1% and platinum 0.3%. And oil began to regain momentum overnight an indications of a gradual tightening of supplies. Meanwhile, Kuwait announced an OPEC meeting in November to discuss the production freeze agreement.

 

Shares

Shares of Fiat-Chrysler (FCA) gained 4% yesterday to a 52-week high after rumors increased that the Chinese Great Wall Motor Company was interested in acquiring the company (or at least its Jeep division). Fiat-Chryler have denied the rumors. In 2010 China’s Geely Group purchased Volvo, and ChemChina bought Pirelli tires in 2015 – all in line with government policy to acquire foreign brands.

 

Today’s Events

8:30 AM GMT UK: Public Sector Borrowing
9 AM GMT Germany & EU: ZEW Economic Sentiment
1 PM GMT US: Housing Prices
8:30 PM GMT API Crude Oil Inventories

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