Morning Markets Aug 27th 2019

Good Tuesday morning-Markets cautious as trying to get a feel out of G-7 & last week's headlines to see what news concerning China/U.S trade war is real, and what is fake (Trump yesterday was shrugging off that trade wars is causing uncertainty, said he has the 'guts' and 'wisdom' to make a deal-Yesterday's news that calmed markets was China/U.S- Trump saying that China called twice & held 'very productive' calls wanting to talk trade & they want to make a trade deal 'very badly...I don't think they have a choice" -He will only make a deal if fair for U.S (Trump also expects XI to do something on HK protests) ! BUT we haven't heard a peep out of China yet & China's Hu of Global Times said based off what he knows "China/U.S top negotiators didn't hold phone talks in recent days" - Overnight we had China's FM Shuang said 'I'm not aware of that' concerning calls Trump said happened over the weekend that China had begun-Also from China's Global Times tweet that top trade negotiators hadn't spoken by phone in recent days and that Trump was exaggerating the significance of the trade contacts. U.S. Treasury Secretary Steven Mnuchin said "there were discussions that went back and forth and let's just leave it at that." Geng Repeated China's stance on the trade talks at Tuesday's briefing. "We hope the U.S. can exercise restraint, come back to reason and create conditions for our consultation based on mutual respect equality and mutual benefit," he said.China's top trade negotiator, Vice Premier Liu He, said Monday China is "willing to solve the problem through consultation and cooperation with a calm attitude," which Trump cited as a positive signal. Still, the Communist Party's flagship newspaper People's Daily said in a commentary on Tuesday that the U.S. "shouldn't misjudge" China's determination to firmly retaliate if America follows through with higher tariffs. In addition, today we await: Case-Shiller, Consumer confidence, Richmond Fed, $40bln 2yr auction, Germanys exports -1.3%, biggest drop in 6+ years, which subtracted -0.5% from GDP (which was -0.1%); Italy's president to consult with party leaders 27th, 28th after initial news was talks between PD/5 Star were going good, but latest is that talks broke off as 5 Star wants Conte as PM something PD is opposing (also some sticking points concerning 2020 budget), but to avoid snap elections and a power grab by Salvini, they better get on same page quickly ! Also saw Iran rejected Macron's proposal to include Iranian missile program in any new talks & UK's Johnson later yesterday said there is substantial disagreement (UK/EU on Brexit), chances of a deal depend exclusively on EU, getting a Brexit deal will be difficult (no kidding) and he refuses to say he won't suspend Parliament (over weekend reports UK if no-deal would only pay EU9b of EU39B 'divorce bill') !!

We begin with stocks in Asia somewhat mixed, but Shanghai rose 1.3% ! European stocks mixed with FTSE in the red, while others are slightly
positive ! U.S futures are flat, after Dow rose 1%/269 points/Nasdaq +1.3% !
VIX 19.5-20 area ! USD softer ! Treasury yields lower/rally-2yr 1.52%/10yr
1.50-1.51%/30yr 1.99%, 2yr/10yr -1/-2 inversion, 3mo-10yr -45/-46bp, 1mo-1yr -34 area ! Oil is rising to $54.30 area ! Gold is rising $1,530-1,531 !
LIBOR'S FELL big AS EXPECTED 1MO TO 1YR (Holiday yesterday 1mo -2.3bp, 3mo -2.7bp, 6mo -4.2bp, 1yr -7.9bp!!!