Morning Report – Wednesday 26th August

Main Headlines

Top U.S. and Chinese trade officials reaffirmed their commitment to a phase 1 trade deal, which has seen China lagging on its obligations to buy American goods, giving a boost to financial markets. The pledge was made in a telephone call between U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, amid concern the deal could be scuppered as U.S.-China ties worsen.

A rally in global stocks stalled within a whisker of February’s record high as investors mulled the pace of the recent gains and expectations for loose monetary policy. Treasuries edged lower. Shares underperformed in Shanghai and Australia, with more muted moves and low volumes elsewhere across Asia. European futures ticked up and S&P 500 contracts were steady after a fresh U.S. record on Tuesday, helped by gains in Facebook. Crude oil traded near the highest in five months as Hurricane Laura bore down on key refining facilities on the U.S. Gulf Coast.

An investigation by the U.S. Treasury Department found that Vietnam deliberately undervalued its currency by about 4.7% against the dollar in 2019, according to a letter sent to the U.S. Commerce Department. The State Bank of Vietnam, the nation’s central bank, facilitated net purchases of about $22 billion worth of foreign exchange last year, which had the effect of undervaluing the dong in a range of 4.2% to 5.2%.

GBP

Sterling has managed to shrug off a lack of progress in Brexit trade negotiations. The pound rose yesterday in spite of the monthly retail sales balance falling to minus 6 in August, according to data from the Confederation of British Industry (CBI), far below forecasts.

EUR

The euro is well supported still after data showed improving German business morale. A German business climate index rose more than expected in August as both manufacturing and services
picked up steam, boosting hopes that Europe’s largest economy is set for a strong recovery following the massive coronavirus pandemic shock.

USD

The dollar was unchanged against most currencies overnight as traders braced for U.S. data expected to show a slowdown in durable goods orders and a key speech by Federal Reserve Chairman Jerome Powell tomorrow. The greenback took a hit after data yesterday showed U.S. consumer confidence tumbled to the lowest in more than six years due to concerns about coronavirus induced job losses.

Main Economic Data/Central Banks/Government (All Times BST)

1:30 p.m.: US Durable Goods Orders