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Holds Marginal Gains After Trade Data


(U1) Fades Off 2021 Highs




(U1) Needle Points North

     TRADE WAR: China has again asserted that the U.S. drops its tariffs weapon,
reiterating that the phase-one deal to end the trade spat currently being
brokered needs to include an agreed degree of tariffs removed. "If the two sides
reach a phase-one agreement, the degree of the tariffs removed should
sufficiently reflect the significance of the phase-one agreement," Ministry of
Commerce (MOFCOM) spokesman Gao Feng said Thursday in a short response to a
question on President Donald Trump's apparent refusal to roll back at least some
of the tariffs imposed since the trade war started.
     DATA: China's October industrial activities, investment and consumption
data were all weaker than expected, adding pressure for policymakers to
stabilize growth. Industrial output slowed to 4.7% y/y from 5.8% in September,
less than projected 5.4%. Fixed-asset Investment recorded 5.2% in Jan-Oct, down
from 5.4% in Jan-Sept and underperforming the 5.4% median forecast. Retail sales
in Oct rose 7.2% y/y, slower than 7.8% in Sept. It was the smallest growth in
six months, and short of expected 7.8%.
     DATA: Foreign direct investment (FDI) into China fell to $9.47 billion in
October from $11.52 billion in the previous month, MOFCOM data showed. FDI into
China for the first ten months totalled $90.46 billion.
     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
for the seventh trading day, leaving liquidity unchanged, according to Wind
Information. The level of liquidity in the banking system is reasonable and
ample, PBOC said.
     The PBOC may inject liquidity by reverse repo on Friday to meet tax payment
demand, the China Securities Journal reported citing analysts. Liquidity had
tightened after the PBOC skipped reverse repos for 14 days and interbank deposit
repo rates increased, the newspaper said. 
     RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) increased to 2.7091% from Wednesday's close of 2.6788%,
Wind Information showed. The overnight repo average rose to 2.6742% from
Wednesday's 2.5833%. 
     YUAN: The yuan weakened to 7.0204 against the dollar from Wednesday's close
of 7.0160. PBOC set the dollar-yuan central parity higher for a third day at
7.0083, compared with Tuesday's 7.0026.
     BONDS: The yield on 10-year China Government Bond was last at 3.2475%, up
from the close of 3.2275% on Wednesday, according to Wind Information.
     STOCKS: The benchmark Shanghai Composite Index edged up 0.16% to 2,909.87,
boosted by consumer electronics shares. Hong Kong's Hang Seng Index edged down
0.93% to 26,323.69.
     FROM THE PRESS: China will cut the minimum capital requirement for some
infrastructure projects, such as ports and waterway transportation by 5% and
allow more borrowing to drive investment, according to the summary of a State
Council weekly meeting on Wednesday, posted on the government website. Capital
for infrastructure building can be raised through equity financing, though no
more than 50% of the total capital, according to the statement.
     China's 2019 CPI may be under 3% even if inflation rises further in Q4 from
3.8% in October, the China Securities Journal reported citing Lian Ping, the
chief economist at the Bank of Communications. Other than rising pork prices,
fuel costs will be limited given low crude oil prices, housing and rental costs
are constrained by regulations, while reduced import tariffs on daily
necessities and automobiles all help rein in inflation, Lian said according to
the journal.
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 10 8532 5998; email:
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]