In response to the US flexing its arms muscles, The Global Times Editor in Chief, Hu Xijin, has responded over Twitter with the following message for the world:
The US is very powerful, & unfriendly to China. That's why I call on China to expand the number of nuclear warheads & enhance nuclear deterrence. China is a defensive country, but we need to possess enough capability so that the US dare not proactively attack China under any circumstances.
Last week, unveiling the flag for his new space force in the Oval Office on Friday, US President Donald Trump said the US was developing a “super-duper missile” to outpace military rivals including Russia and China.
We have no choice, we have to do it with the adversaries we have out there. We have, I call it the super-duper missile and I heard the other night [it’s] 17 times faster than what they have right now,
the president said, sitting at the Resolute Desk.
“That’s right,” said the Defence Secretary, Mark Esper, standing to Trump’s right.
Quote
Words start wars and end them, create love and choke it, bring us to laughter and joy and tears. Words cause men and women to willingly risk their lives, their fortunes and their sacred honor. Our world, as we know it, revolves on the power of words,”
― Roy Williams
Market implications
The prospect of a war between the US and China has been whipped up in recent times, although is not considered as an immediate threat in the markets. However, the tinders are being layered down to get the fire started, and it is prudent for investors to remain alert. For now, traders are more concerned for the day to day strategic means for reopening economies pertaining to the COVID-19 lockdowns. On Friday, "the market’s sentiment continued to fluctuate between fears of economic downturns and hopes on reopenings. Treasury yields remained depressed throughout the week," – FXStreet
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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