Overview: There is an uneasy calm in the global capital markets. Investors are digesting the weekend news, which includes the failure of APEC to issue a joint statement due to US-China tensions that we highlighted by dueling speeches by China President Xi and US Vice President Pence. There was apparently little progress on breaking the impasses in the UK over Brexit. Although Prime Minister May is widely criticized, there is no agreement on an alternative plan or leader. Equity markets are mostly higher. The MSCI Asia Pacific extended its advance for a third session, while in Europe, the Dow Jones Stoxx 600 is trying to snap a three-day fall. The S&P 500 traded higher in the last two sessions, and the early call is flat to slightly higher. US 10-year Treasury yields have not risen since November 8, and that streak may also come to an end today. Core European yields are a couple basis points higher, while peripheral yields are softer.  The US dollar is narrowly mixed. Of note, the Australian and New Zealand dollars, which had been outperformers are the heaviest today, with the complex of European currencies trading firmer.

Asia Pacific

Xi and Pence exchanged barbs at APEC Summit over the weekend. The rhetoric contrasts with hopes that the US and China can find a way forward at the G20 gathering at the end of the month when Trump and Xi meet.  A dispute over the wording of the final statement prevented one from being issued. It is the first time APEC failed to generate a joint statement, though previously an ASEAN gathering also could not agree on a final statement as Sino-American rivalry created a fissure.  Former Treasury Secretary Paulson has warned of an “economic iron curtain,” and given the US tariffs and threats of more, it seems to already be taking place, and it is most certainly not just about economics as the attempt to revitalize the “Quad” (US, Japan, India, and Australia) to block the projection of Chinese military influence in the area.