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US-China trade, currencies in focus

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Stocks in Australia slipped in Wednesday morning trade on the back of concerns over the state of ongoing U.S.-China trade negotiations, amid reports that the White House had canceled a trade planning meeting with Beijing this week.

The ASX 200 slipped 0.22 percent in early trade as the major sectors traded mixed. The energy sector fell more than 1.4 percent as oil stocks mostly fell on the back of Tuesday’s drop in crude prices. Santos dropped 1.82 percent, Oil Search declined 1.19 percent and Woodside Petroleum fell 0.68 percent.

Meanwhile, futures also pointed to a lower open for the Nikkei 225 in Japan. The Nikkei futures contract in Chicago was at 20,435 while its counterpart in Osaka was at 20,390. The benchmark index last closed at 20,622.91.

The Bank of Japan is scheduled to issue its statement on monetary policy later today, with interest rates expected to be left unchanged.

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David Rubenstein says U.S. China trade talks likely to end in months and government should reopen in days

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David Rubenstein, co-founder and co-executive chairman of The Carlyle Group, speaking at the 2019 WEF in Davos, Switzerland on Jan. 22, 2019.

Adam Galica | CNBC

David Rubenstein, co-founder and co-executive chairman of The Carlyle Group, speaking at the 2019 WEF in Davos, Switzerland on Jan. 22, 2019.

“Talking to people in Washington, my sense is that both sides are looking for a way to resolve this relatively quickly because it’s beginning to hurt the U.S. economy,” the billionaire private-equity firm executive said. “Nobody knows exactly how to end it, but I do think in the next few days it should be over.”

President Donald Trump last week canceled his delegation’s trip to Davos, citing the shutdown.

Rubenstein’s firm is based in Washington, and he’s had a history of working in politics. In 1975, he was chief counsel to the U.S. Senate Judiciary Committee’s Subcommittee on Constitutional Amendments. During former President Jimmy Carter’s administration, Rubenstein was deputy assistant to the president for domestic policy.

Trade negotiations between the U.S. and China have been ongoing for months ever since both countries have started slapping billions of dollars of tariffs on a variety of goods. They have set a March 2 deadline in their cease-fire for imposition of a new round of tariffs.

The debate over the government shutdown has focused on President Donald Trump’s demand for $5.6 billion to build a wall along the border with Mexico. Democrats led by House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer have stood firm in opposing Trump’s wall.

The president on Saturday proposed temporary protections for about 700,000 young immigrants in exchange for border wall funding, but Pelosi and Schumer have already rejected that proposal, with the Senate minority leader labeling the offer as “not a compromise but more hostage taking.”

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Nuclear instability at levels not seen since Cuban Missile Crisis

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A deactivated Titan II nuclear ICMB is seen in a silo at the Titan Missile Museum on May 12, 2015 in Green Valley, Arizona. 

Brendan Smialowski | AFP | Getty Images

A deactivated Titan II nuclear ICMB is seen in a silo at the Titan Missile Museum on May 12, 2015 in Green Valley, Arizona. 

The risk of a global nuclear arms race has risen to a level not seen since the aftermath of the Cuban Missile Crisis of 1962, according to a former U.S. ambassador to Russia.

In October, President Donald Trump announced the U.S. will end its 1987 Intermediate-Range Nuclear Forces (INF) Treaty with Russia, accusing Moscow of violating its terms. At the same time, Trump has also called for billions of dollars of new spending on new missile defense programs.

Speaking at the World Economic Forum in Davos on Tuesday, the president of the Carnegie Endowment for International Peace and former US ambassador, William Burns, said a conflation of events was creating instability.

“2019 could be as consequential a year for nuclear order since the immediate aftermath of the Cuban Missile Crisis where that brush with Armageddon cause the beginnings of a serious U.S./Soviet effort at arms control,” Burns said.

The INF Treaty between the US and Russia was signed in 1987 and sought to eliminate nuclear and conventional missiles, as well as their launchers, with short ranges (310–620 miles) and intermediate ranges (620–3,420 miles).

Burns said following U.S. accusations that Russia has developed a missile banned by the agreement he saw little prospect of the INF treaty being renewed and both sides would “walk away from it now.”

The former ambassador added that a separate 2010 “New START” (Strategic Arms Reduction Treaty) arrangement, which sought to limit nuclear missile launchers and improve inspections, could also fall by the wayside when its terms expire in 2021.

Burns said the bilateral breakdown between Washington and Moscow was putting pressure on the global situation when previously the two countries had acted in concert to prevent unruly actors or countries

“For better or worse, America and Russia have unique capabilities and responsibilities on nuclear issues and when we are not living up to them it tends to inspire the worst behaviors on the part of other countries,” said Burns.

Trump’s promise to spend billions on missile defense would also trigger a new arms race according to Burns who predicted a greater temptation in Beijing or Moscow to invest even more actively in offensive nuclear technology.

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