U.S. Vice President Mike Pence. (Photographer: Zach Gibson/Bloomberg)

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U.S.-China breakthrough looking less and less likely, Brexit still in focus,  U.S. Thanksgiving volumes and Asia-Pacific leaders failing to agree on a joint statement. Here are some of the things people in markets are talking about today.

New Cold War?

Vice President Mike Pence sharpened U.S. attacks on China during a week of summits that ended Sunday. Most notably, he called for nations to avoid loans that would leave them indebted to Beijing. The tough talk has raised concerns that a new cold war is brewing for the first time since the Soviet Union fell in the early 1990s. Pence said the U.S. wasn’t in a rush to end the trade war and would “not change course until China changes its ways” — a worrying prospect for a region heavily reliant on exports. The meetings in Singapore and Papua New Guinea produced little to suggest U.S. President Donald Trump and Chinese counterpart Xi Jinping would reach a deal when they meet in a few weeks at the Group of 20 summit in Argentina.

No Statement

Asia-Pacific leaders failed to reach a consensus on the wording of a communique after two days of talks in Papua New Guinea, reflecting heightened tensions fueled by a trade war between the U.S. and China. The leaders have never previously failed to agree on a statement since they began meeting annually in 1993. A U.S. official familiar with the talks said China balked at some language related to trade.

Market Open

Asian equity futures point to a modestly firmer open after U.S. stocks finished a rocky week on a high note on trade optimism. Any rally may be kept in check by lengthening odds of a thaw on trade when Donald Trump and Xi Jinping meet at the Group of 20 that starts next week, following Pence’s attacks on China. Volume will likely be thinned by the U.S. Thanksgiving holiday this week, potentially exacerbating swings. Treasuries advanced Friday after Fed Vice Chairman Richard Clarida said policy is getting close to neutral and there's some evidence of global slowing. The dollar fell against every G-10 peer including the pound, which remains subject to Brexit jitters. Oil and gold both rose.

Bond Bulls Energized 

With the U.S. entering Thanksgiving week, bond bulls can be thankful for the geopolitical turmoil and global-growth concerns that could eventually lead the Federal Reserve to pause its policy tightening. Tensions in Europe — from wrangling over Italy’s budget to the fight over U.K. Prime Minister Theresa May’s Brexit deal — are boosting the appeal of Treasuries as a haven. At the same time, top officials at the Fed are signaling greater focus on the risk of cooling growth outside the U.S., pushing traders to trim wagers on rate hikes next year. Traders are now pricing in only about 35 basis points of Fed hikes next year. That’s down from over 50 basis points earlier this month, and is less than half of what the Fed itself projects.

Coming Up…

Brexit will continue to loom large over the pound and markets this week as Theresa May’s future hangs in the balance. Meanwhile,  Bank of Japan Governor Haruhiko Kuroda speaks Monday at an event in Tokyo along with Bank of France Governor Francois Villeroy de Galhau.  In London, Bank of England Governor Mark Carney appears before lawmakers on Tuesday, with Brexit questions likely. Philip Lowe, governor of the Reserve Bank of Australia, and the Bank of Canada’s Carolyn Wilkins also have speeches. New York Fed President John Williams speaks later Monday. Of note this week, Japan trade figures are due Monday and CPI on Thursday, and RBA minutes will be released on Tuesday.

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