US-CHINA: Bessent Speaks On Trump-Xi Meeting, Deal Could Be Signed Next Week
(MNI) London - US Treasury Secretary Scott Bessent speaking to Fox Business News regarding the Trump-Xi meeting earlier today. Says that the two presidents "were able to discuss big picture issues". Bessent: "Xi said he could agree to the US-China consensus reached in Malaysia". Bessent claims that signatures on a China deal (the 'Kuala Lumpur Agreement') could come as soon as next week. Says China has committed to 'massive' amounts of agri purchases from US as part of the deal.
- Bessent: "The US agreed to cut in half its fentanyl-related tariffs on Chinese goods in return for reducing fentanyl precursor chemical flows to the US."
- Bessent: "President has been laser focused on rare earths since day one of this administration...he realises it is a strategic vulnerability for the US." Claims that the issue has been "20 years in the making".
- Bessent confirms that the US is suspending the new rule on the entity list with regards to export controls for a year in exchange for the Chinese pause on rare earth restrictions.
- Adds that the Section 301 restrictions targeting Chinese maritime logistics and shipbuilding have also been suspended for a year. Bessent claims shipbuilding will be integrated with Western allies following deals with South Korea and Japan.
- On reports Japanese PM Sanae Takaichi pushing back on US demands to halt purchase of Russian O&G, Bessent says "over time they will be weening off" of Russian energy, and that Japan will become part of nascent Alaska pipeline project.
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OUTLOOK: Price Signal Summary - Recent Recovery In Bunds Appears Corrective
- In the FI space, Bund futures have recovered from their recent lows - this appears to be a correction for now. Key support and the bear trigger remains exposed. It lies at 127.61, the Sep 3 low. Clearance of this level would cancel a recent bullish theme and confirm a continuation of the medium-term bear cycle. For bulls, a reversal higher would refocus attention on key resistance at 129.44, the Sep 10 high. First resistance is 128.84, the 61.8% retracement of the Sep 10 - 25 bear leg.
- Gilt futures have recovered from their latest lows. The move down last week strengthens a bearish theme and does suggest the end of the recent corrective phase between Sep 3 - 11. Note that on the continuation chart, moving average studies are in a bear-mode position, highlighting a dominant downtrend. A resumption of weakness would open 89.94, the 76.4% retracement of the Sep 3 - 11 corrective phase. Initial resistance to watch is 91.28, the Sep 24 high.
UK: PM To Deliver Conference Speech @14:00BST Under Major Political Pressure
Prime Minister Sir Keir Starmer will deliver a keynote address to the annual conference of his centre-left Labour Party at ~14:00BST (09:00ET, 15:00CET) Livestream here. The speech is seen as an important one for the PM as he is set to remain under intense political pressure in the short and medium term:
- The latest opinion polling from Ipsos shows Starmer with the lowest personal satisfaction rating of any British prime minister since the outlet began conducting surveys in 1977. The PM's net rating for September is -66, with the previous recorded lows coming from Conservative prime ministers, Rishi Sunak (-59, April 2024) and John Major (-59, August 1994).
- The upcoming budget announcement on 26 November is expected to raise the UK's tax burden further from already post-war highs. MNI's Markets team have assessed some of the potential options for the chancellor ahead of the announcement. Higher taxes without demonstrable improvements in public services could spur further shifts in support towards Nigel Farage's right-wing populist Reform UK.
- The next electoral test for the PM and Labour comes in May 2026. Local elections will take place across swathes of England in addition to elections to the Scottish and Welsh parliaments. Poor results in these contests, particularly the loss of first place in Wales and control of cities in the Midlands and northern England to Reform UK could spark a leadership challenge against Starmer.
EUROPEAN INFLATION: German State-Level Details: Firmer Energy, Services
Looking a bit closer at this morning's German state level September CPI data, an energy acceleration to around -0.7% Y/Y (from -2.4% in August) stands out, bringing overall goods inflation to around 1.5-1.6% Y/Y (1.3% prior). Also services looks firmer than previously this time, at around 3.3% Y/Y (3.1% prior).
- Food inflation appears to have tapered off a little, to around 2.9% Y/Y in September (incl. non-alcoholic beverages, vs 3.2% prior).
- Within the services-heavy subcategories, the largest magnitude of change will likely be in education, we see the category around 3.9% Y/Y (from 5.1% prior, but note its low weighting in the CPI basket). Restaurants and hotels meanwhile seem to have accelerated, to around 3.9% - 4.0% (3.6% prior). Restaurants will see a VAT decrease in January in Germany.
- The mixed-weighting transport category meanwhile also accelerated, that comes on the back of the mentioned energy acceleration which is driven by base effects. We see transport at around 2.5% Y/Y in September (vs 1.4% prior).
