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Good morning. Markets and gift-buying consumers got some relief on tariffs, tensions are still running high in Hong Kong and talk of a possible election in the U.K. continues. Here’s what’s moving markets.

Holiday Relief

It had been a relatively sleepy time on the trade front but the surprise announcement of a delay on U.S. tariffs on a selection of Chinese goods gave markets a jolt and put smiles on the faces of toy companies, with the changes set to bring some relief to U.S. consumers in the holiday season. The next round of talks looks to have been set for a fortnight from now and President Donald Trump says he held a “very productive” call with China on trade. All eyes are back on whether these better relations can last all the way through to the next negotiations, which China remains committed to in September.

Tensions High

Tensions in Hong Kong are still running high, with President Trump yesterday stoking fears about a possible Chinese intervention by tweeting about the reports of Chinese troops massing at the border. At present, the epicenter of the protests in Hong Kong, the airport, is relatively calm. But certainly, it has provided much for Chinese leader Xi Jinping to consider about his response. Then again, with industrial output in China hitting a 17-year low and retail sales slumping in July, he’ll have plenty on his plate.

Election Talk

Members of U.K. Prime Minister Boris Johnson’s staff talk about an imminent general election as if it were already in the calendar, but be reminded that in order to actually call an election Johnson would need two-thirds of MPs to vote for it, and getting that many people on the same side of an issue is a tall order these days. Note too that the Scottish court challenge to Johnson’s proposal to suspend Parliament to push through a no-deal Brexit is to be heard in September under an accelerated timetable, so the obstacles keep piling up.

Thin Liquidity

Sure, the thawing of trade tensions got markets moving on Tuesday, but even by the standards of August this has been a time of very thin liquidity. That provides time for debate on the hot topics of the market. First, when will the bull run in stocks end? At least one set of strategists think the answer lies in the spread between two- and ten-year Treasury yields, a trusted recession indicator. The other question is what to do if Treasury yields head towards zero, or even negative, the response to which appears to be hedging as much of that risk as possible.

Coming Up...

Relief on tariffs meant the rise in European and U.S. stocks on Tuesday carried over into the Asian session. All eyes will be trained on the GDP numbers from Germany and the euro area, particularly the former on expectations it will show a contraction in the second quarter and as German Chancellor Angela Merkel started to show signs of a willingness to act to shore up the economy. U.S. crude inventories data is coming up in the European afternoon. We’ll also get results from Tencent Holdings Ltd., the Chinese giant behind the time-devouring video game Fortnite.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours.

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