CHINESE FACTORIES: Surveys by China's government and a major business magazine showed activity weakened in December as global and domestic demand cooled. Forecasters said that could send shockwaves through Asian economies that supply Chinese factories with raw materials and components. Chinese export growth has held up as producers rushed to fill orders before possible new U.S. tariff hikes in Washington's trade battle with Beijing, but forecasters said that effect may be fading.
ANALYST'S COMMENT: The Chinese manufacturing downturn "raises a few red flags," said Mizuho Bank's Vishnu Varathan in a report. The slide is "not entirely surprising given more challenging global trade conditions," but it is "potentially symptomatic of far sharper underlying demand pullback," said Varathan. China's extensive trade ties with its neighbors mean the slowdown "will reverberate more widely to other Asian exporters."
US-CHINA TRADE TALKS: Investors are looking ahead to talks this month aimed at settling a U.S.-Chinese tariff battle that threatens to dampen global economic growth. Presidents Donald Trump and Xi Jinping agreed Dec. 1 to a 90-day suspension of further tariff hikes in their fight over Beijing's technology policy but left in place penalties already imposed. No date has been announced but both sides have expressed interest in a settlement. Economists say the 90-day window is likely too small to resolve the full range of issues that bedevil their relations.
NORTH KOREA: Leader Kim Jong Un expressed hope for extending nuclear talks with Trump this year but said Pyongyang is ready to take a different path if Washington "misjudges the patience of our people." Some analysts say North Korea has been trying to drive a wedge between Washington and Seoul and put the burden for action on the United States. Pyongyang has accused Washington of failing to respond to its dismantling of a nuclear testing ground and suspension of nuclear and long-range missile tests.
CHINA-TAIWAN: Xi appealed to Taiwan to reach an early consensus on uniting the self-ruled island with the mainland and warned Beijing will not tolerate pro-independence activity. Xi said Beijing is "willing to create a vast space for peaceful unification" but gave no details. The two sides split in 1949 after a civil war but have extensive trade and investment ties. Taiwanese President Tsai Ing-wen said Monday that gains by a Beijing-friendly opposition party in local elections "absolutely don't mean" the island's public "want us to give ground on our autonomy."
CURRENCY: The dollar edged down to 109.36 yen from Monday's 109.67. The euro declined to $1.1446 from $1.1466. ENERGY: Benchmark U.S. crude lost 46 cents to $44.95 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 8 cents on Monday to close at $45.41. Brent crude, used to price international oils, slumped 68 cents to $53.12 per barrel in London. It added 59 cents the previous session to close at $53.80.