Light displays sit on buildings on the city skyline ahead of Chinese President Xi Jinping’s arrival in Hong Kong, China. (Photographer: Anthony Kwan/Bloomberg)

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The U.S. will postpone lifting  tariffs on Chinese goods as the two nations try to nail a trade pact, stocks look set to open higher on Monday amid optimism over some sort of a deal, and Brexit maneuvering continues as deadline approaches. Here’s what’s moving markets this morning.

China Tariff Deadline Extended

President Donald Trump said he’s extended a deadline to raise tariffs on Chinese goods until he can meet Chinese President Xi Jinping after the two sides made “substantial progress” in the latest round of trade talks that wrapped up Sunday.  If the sides make further progress, Trump said he and Xi planned to meet in Mar-a-Lago to conclude an agreement, though he didn’t specify the timing around it. The U.S. and China are currently stuck on how to ensure Beijing lives up to its promise it won’t weaken the yuan as part of a trade deal, according to people familiar. There are several ways China influences its currency, such as driving up the cost of betting against the currency in Hong Kong and the central bank’s daily fixing. Secretary Steven Mnuchin said the two sides agreed on a currency provision and China's Liu He voiced optimism that an accord would be reached. Meanwhile, U.S. President Donald Trump is becoming frustrated with his top negotiator, Robert Lighthizer. 

Brexit Stakes Raised

U.K. Prime Minister Theresa May once again postponed a final vote on her Brexit divorce agreement, raising the stakes in a battle with members of her own cabinet who are fighting to avert a no-deal exit. The prime minister set a new deadline of March 12 -- just 17 days before Brexit day -- for parliament to vote on the accord she’s still trying to renegotiate. The move risks making those who are seeking to avoid a catastrophic no-deal departure even more determined to defeat her. They’ll have a chance to do that on Wednesday, when they’ll try to force her to delay exit day in order to avoid the economic damage of crashing out. Meanwhile, it emerged on Sunday that European Union officials are also working on a new plan that could help get the deal over the line at the last minute.

Markets Open

Asian equity futures are higher this morning, following Friday's rally in the U.S. Stocks gained on the positive signs coming from trade negotiations, rising for a fourth-straight week. Treasuries advanced and the dollar declined. Oil posted a second-straight weekly advance. The yuan was higher this morning and will stay in focus. The British pound also ticked higher. Aside from trade and Brexit, of interest to the traders this week: Trump and North Korea’s Kim Jong Un meet in Vietnam and Federal Reserve Chairman Jerome Powell will offer signals on what’s next for the Fed during two days of congressional testimony. Also, attention will turn to Michael Cohen, the former Trump fixer sentenced to three years in prison, who will give two days of congressional testimony. 

Debt Is Back in China

From bank loans to trust-product issuance to margin-trading accounts at stock brokerages, leverage in China is rising. While seasonal effects explain some of the gains, analysts say the trend has staying power as authorities shift their focus from containing the nation’s $34 trillion debt pile to shoring up the weakest economic expansion since 2009. The question now is whether China’s attempt to create a healthier mix of financing -- fewer shadow banks, longer debt maturities -- will prove successful. Premier Li Keqiang underscored the challenge last week, warning of risks from sharp increases in short-term debt after China’s credit growth surged to a record in January.

Trump and Kim’s Second Summit

Trump emphasized the potential for progress with denuclearizing North Korea as he prepared to depart for Vietnam for a second meeting with Kim, even as Secretary of State Mike Pompeo said talks will take time and that a third summit may be necessary.  In three tweets on Sunday before leaving for Hanoi to meet the North Korean leader, Trump praised Chinese and Russian support and cited the potential for fast economic development in North Korea if it abandons its nuclear program. Trump also lauded sanctions placed on the border by China and Russia.

What We’ve Been Reading

This is what’s caught our eye over the weekend.

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