European markets are set to open up 0.8%/1% thanks to a very solid performance in Asia where the Hang Seng closed up 3.2% amid speculation Chief Executive Lam may formally withdraw the extradition bill that sparked months of protests. Lam has called for a meeting with pro-establishment politicians. No official news has been published since.

It is actually fairly amazing to see markets bouncing despite continued trade escalation, CNH dropping to new lows on the year and a continued breakout out of the USD.

The situation is quite delicate even in UK where MPs won a crucial vote to stop no-deal Brexit. 

Overnight we had the news of Beijing trying to delay US tariffs while the CNBC reported that Trump wanted to double tariffs on Chinese goods when he learned on the 23rd of August about China’s plans to impose duties on 75bn$ of US imports.

The market doesn’t seem to be scared as we are now above the levels before yesterday’s horrendous manufacturing ISM, sentiment is just awful….everyone is bearish as shown on the several charts sent out at our Investment Committee. Export orders dropped to the lowest level we’ve seen since 2009/2012.

In UK, the government lost a vote which saw 21 rebel Conservatives (Including former Chancellor until a few weeks ago Hammond) vote with opposition parties to set time aside today for the House of Commons to debate and vote a law seeking an extension to Article 50 on October 19th if a deal has not been agreed by then. Now MPs will try to pass a new law, in order to try to make the government ask the EU to delay Brexit until 31 January 2020. This law will be debated and voted on in the House of Commons on today, and could move to the House of Lords on Thursday 5 September. If passed, the bill could become law on Monday 9 September.

Boris immediately said that he would bring forward a motion calling for a General Election but under the Fixed Term Parliament Act that requires a 2/3s majority to pass.

In Italy, things are instead going ahead smoothly, 79.3% of M5S members voted in favor of coaliton with PD. PM Conte will meet President Mattarella at 10 and will present the new Cabinet and program. Confidence vote expected by Monday at the latest.

The next important trigger is the ECB on the 12th and Fed on the 18th.

We will have plenty of Fed speakers today: Williams, Evans, Bowman.

Yesterday we had ECB’s Muller saying that there is no strong case to resume bond buying program and we also had Villeroy skeptical on QE as well. Dissenters now starting to pile up into next week’s ECB which is a bit worrying.

Macro wise, we had overnight the Chinese AugustComposite PMI of 51.6 vs prev 50.9. Australian August Composite PMI 49.3 vs 49.5 prior and Indian August Composite PMI 52.6 vs prev 53.9.