Take Five: Vanity Fair

LONDON (Reuters) –

1/TRADE TENSION HEADACHES

Washington’s latest accusation that China is dumping wooden cabinets and vanities on U.S. shores sums up the mood between the two warring sides as they head into another round of high-level discussions.

The talks in Washington on Oct. 10-11 will be led from the Chinese side by President Xi Jinping’s top economic adviser, Vice Premier Liu He. Investors’ expectations are low, given Trump’s penchant for impulsive forays in the nearly two years of on-again, off-again negotiations.

His latest maneuver, which came just before China went on a week-long break to celebrate the 70th anniversary of the founding of the Communist Party, was a threat to delist Chinese companies from U.S. stock exchanges. Beijing has said this would be a radical escalation of trade tensions.

Meanwhile, upcoming Chinese data should show the monetary pumps are working hard at softening the economic blow from the trade war. Credit growth and money supply have been rising, despite authorities’ repeated insistence they won’t throw too much money at the problem.

(GRAPHIC: China TSF, GDP and markets – .FTSE, which suffered their worst one-day fall this week since before the 2016 referendum, is just as confused.

(GRAPHIC: Pound volatility – here)

5/POLAND, PORTUGAL, POLLS AND POPULISTS

As the election calendar gets busy again, observers are trying to garner fresh glimpses of what momentum populist politicians in Europe are able to muster, and how populist governments can square the circle of coming good on spending pledges as the continent’s economy slows.

Poles vote on Oct. 13 in a parliamentary election. In a campaign choc-a-bloc with hefty spending pledges, the ruling nationalist Law and Justice (PiS) party under leader Jaroslaw Kaczynski has turned itself into the champion of the welfare state and traditional Polish values. Polls predict an election win for PiS, accused by the EU of undermining the rule of law and with a history of clashing with Brussels over judiciary reforms.

In Portugal, the ruling Socialists won Sunday’s parliamentary election but fell short of an outright majority, meaning Prime Minister Antonio Costa will need to negotiate a new deal with one or both of his far-left allies in the previous legislature.

Costa’s government has received praise from Brussels and at home for combining fiscal discipline with measures to promote growth after recession and the austerity of Portugal’s 2010-14 debt crisis.

(GRAPHIC: Euro area exit risks – here)