ECB Markets trade

For War-Weary Markets, China’s Daily Press Briefings Matter More Than ECB Hawks

"Effective communications" - from China's Foreign Ministry and from the ECB's Sabine Lautenschlaege.

We’re back in the “optimism” phase of the trade war news cycle, as Friday’s headlines sound a lot like those that helped buoy risk sentiment on Thursday.

“The two teams are maintaining effective communication”, Chinese Foreign Ministry spokesman Geng Shuang said at the regular briefing on Friday.

It was the second day Chinese officials succeeded in jawboning markets at regular briefings. On Thursday, it was Chinese Commerce Ministry spokesman Gao Feng. 

Rinse and repeat, apparently.

Geng continued on Friday, noting that Beijing “hopes the US can demonstrate good faith and take real action to work in concert with China and find solutions together on the basis of mutual respect”.

Again, that’s basically just the same soundbite from Thursday, but if it not’s broke, don’t fix it, we suppose. It’s seemingly enough for war-weary markets headed into the weekend and month-end.

Notably, these nebulous trade headlines are overshadowing yet another day of hawkish messaging from ECB officials. “I don’t see the need for a re-start of the asset purchase program”, ECB Executive Board member Sabine Lautenschlaeger told MNI, in an interview.

Lautenschlaeger’s remarks echoed those of Klaas Knot, who told Bloomberg on Thursday that he doubted whether the restart of net asset purchases was appropriate at the current juncture. 

“[QE] should only be used if you have a deflation risk and a deflation risk is nowhere to be seen now”, Lautenschlaeger continued, adding that “rate cuts are part of the standard monetary policy tools, so it is something you should certainly think about before you consider non-standard measures like APP”.

As expected, the flash read on eurozone CPI came in at 1% YoY in August, a mile away from target. Core was 0.9%, a shade below estimates.

Ultimately, Lautenschlaeger told MNI that she doesn’t “see the need for a huge package”.

Consider that your not-so-friendly reminder that irrespective of what happens between now and mid-September, the risk of the ECB and the Fed disappointing is non-trivial.

But, as Friday’s action shows, the trade narrative is all that matters in the interim, something Donald Trump would do well to respect. Stocks are on track to snap their second four-week losing streak of 2019 – both of those streaks were tied to trade war escalations.


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