GERMANY: Merz Talks On Econ Cooperation Ahead Of Xi Meeting
(MNI) London - Reuters reporting comments from Chancellor Friedrich Merz, who is speaking in Beijing on the occasion of his first official visit to China since taking office in mid-2025. As would be expected, Merz's comments focus on the economic and trade balance between China and Germany (and indeed the wider EU). Merz says German and European companies "see issues regarding opening markets in certain sectors in China...Chinese contribution to the WTO agreement on gov't procurement could open up important additional market segments." Says "We generally welcome any further market opening, this is in our mutual interest".
- On two major issues for Germany and the EU, Merz says that it is "important to reduce market-distorting subsidies and consolidate the market where we see overcapacity." Merz: "We want to reap the benefits of open markets and enable stronger domestic demand in China." Merz: "A moderate appreciation of the yuan would make it easier to continue trading without barriers."
- On raw materials: "Where Chinese export controls are introduced, approval processes should be quick and unbureaucratic."
- During their meeting earlier, Chinese Premier Li Qiang's comments also focused on trade, saying, "Unilateralism and protectionism have gained in importance and are even widespread in certain countries and regions. Against this backdrop, China and Germany, as two major economies and influential nations in the world, should further strengthen their trust in cooperation."
- Merz is set to meet with President Xi Jinping shortly in a set of discussions that will garner focus not just in Berlin, but in European capital and Washington, D.C., as well.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GERMAN AUCTION PREVIEW: Coupon Announcement
Germany has announced a 2.10% coupon for the new Mar-28 Schatz on offer tomorrow. E6bln of the Schatz will be sold.
MNI: GERMANY JAN IFO BUSINESS CLIMATE INDEX 87.6
- MNI: GERMANY JAN IFO BUSINESS CLIMATE INDEX 87.6
GILTS: Opening Rally Fading
Gilts rally at the open, mainly looking to the uptick in wider core global FI markets since Friday’s close, before fading from highs.
- Much of the rally in Tsys came late on Friday as Rick Rieder became the favourite to become the next Fed Chair (per betting market odds) after a BBG source report suggested as much.
- Geopolitical risks and a move lower in long end JGB yields also provide cross-market support.
- Locally, the weekend saw the Labour NEC block Mayor of Manchester Andy Burnham’s application to run as an MP in the by-election in Gorton and Denton. The market had already unwound the brief bout of ‘PM Burnham risk’ that was priced in last week, given the challenges he was assumed to (and ultimately did) face in his push to become an MP. Still, there may be some background demand for UK paper on the news.
- Gilt futures +4 at 91.31 vs. highs of 91.56.
- Last week’s price action undermined a bullish technical theme in the contract. Trendline support drawn off the Nov 19 low (91.12 today) was pierced. Bears will look for a more meaningful move below there before targeting the Jan 2 low (90.70). Conversely, initial resistance is located at the Jan 22 high (92.13).
- Yields 0.5-2.0bp lower, curve flatter.
- 10s back below 4.50%, leaving early January highs (4.538%) untested at this stage. Triangle pattern formed, with boundaries at 4.346% & 4.513% today. See chart below.
- Little of note on the UK macro calendar this week.
- Note that the BoE will sell GBP675mln of long bucket gilts from its APF holdings this afternoon.
Fig. 1: UK 10-Year Yields (%)
Source: MNI - Market News/Bloomberg Finance L.P.
