On the Margin: Eerie Calm in China and Italy

https://trendmacro.com/system/files/reports/20180924TrendMacroMargin-G1.pdf
On the Margin
Monday, September 24, 2018
All Complacent on the Eastern Front; Government of Confusion
Asia Macro
Asia Stocks
FX
US Stocks
Europe Macro
Europe Bonds
US and Chinese stocks rallied last week as new US tariffs were imposed and Chinese retaliation was announced, possibly because Trump created a period for negotiation until year-end when they automatically more than double. China is desperately debt-stimulating its CAPEX-driven growth model, and trying to jawbone yuan stability after six back-to-back months of weakness. Li articulated the deep sticking point, China’s existential commitment to state control and subsidy of key industries. That won’t lend itself to either/or bargaining outcomes, but offers a broad field for compromise, still potentially before the US mid-terms. Italy’s coalition has fallen into timidity and confusion, lowering the risks of a budget confrontation with the EU that would threaten Italeave, at least temporarily relieving sovereign yields. Still a possible “October surprise.”
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