MIDEAST: Warning Across Riyadh

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China President Xi’s trip to the US to visit U.S. President Trump will be in focus in the coming week. 

• Trump is due to meet Xi on his arrival at Joint Base Andrews near Washington, D.C., on Wednesday, 23 September. This will be followed by formal bilateral talks on Thursday, 24 September in what will be Xi’s first visit to the White House since Barack Obama was its tenant. These talks will be followed by a state dinner, with key figures from the world of tech and AI, including Nvidia’s Jensen Huang, OpenAI’s Sam Altman, and Tim Cook, formerly of Apple, all due to attend (there is the prospect of a sideline meeting with such individuals as part of Xi’s visit). The state visit comes at a time when Sino-US relations are at a tense moment. Competition in the AI sphere and over critical minerals, cross-Strait tensions, China’s close economic ties with Iran, and the looming expiry of the trade war truce between the US and China on 10 November all offer potential obstacles to the visit passing off without incident.
• In an effort to head off any complications on the latter issue, US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with Chinese Vice-Premier He Lifeng in New York on 20 September for a final round of talks before the Trump-Xi meeting.
• Otherwise, it’s a much quieter US calendar for more traditional releases after the past three weeks were headlined by payrolls, CPI and the FOMC decision.
• Flash PMIs for September probably headline data along with relatively heavy Fedspeak compared to so far under Chair Warsh’s leadership.
• Of speakers, NY Fed’s Williams will be most anticipated after dovish remarks in the lead up to the FOMC meeting before a unanimous decision (including Williams's concurring vote) to hike rates this week. 

• Treasuries look to finish near session lows - holding the range since midmorning - TYZ6 just off Wed's post-FOMC low of 105-21 at 105-25.5 Friday (-12), yield +.0698 at 5.0002%.
• Recent weakness maintains the price sequence of lower lows and lower highs and note that moving average studies are in a bear-mode position, highlighting a dominant downtrend. Sights are on 105-10+, the Oct 19 ‘23 low on the continuation chart.
• Kansas City Fed’s Schmid (non-voter, hawk) stuck to hawkish rhetoric in the first post-FOMC appearance touching on monetary policy with inflation still his primary concern. He didn’t offer a view on his preferred rate path ahead – the speech is on instant payments – although that could still come up in the Q&A. We wouldn’t be surprised if he was one of the four dots who pencilled in two additional rate hikes this year.
• Lone data: Industrial production unexpectedly softened in August, with flat expansion vs the +0.3% M/M expected and +0.2% prior. The miss was the result of a surprising contraction in manufacturing production, with a 0.3% drop compared with the +0.3% consensus (+0.2% prior) for the first decline since December 2025. In contrast, the volatile Utilities sector posted +1.8% M/M growth, the best of the year, while Mining remained relatively flat at 0.1%.
• Friday’s FX session has been dominated by volatility for the Japanese yen in the aftermath of the Bank of Japan’s latest rate hike to 1.25%. BoJ rate check explained a minor move higher in JPY around midmorning.
• Look ahead: ECOFIN meetings all day Saturday. Japan bank holidays next Monday through Wednesday. German Import Prices early Monday, Eurozone flash PMIs next Wednesday. Central Bank speakers on Monday: Chicago Fed Goolsbee, BOC Gov Macklem and BA Assist Gov Hunter.