US-China mini trade deal hits setback

7 November, 2019

A lot of excitement and positive news has been building in financial asset prices over the past few days. The three major US indices climbed to new highs, European and Asian stocks were also on the rise, the Chinese Yuan strengthened to below 7 per Dollar and most major currencies rallied against the Greenback. Most of this excitement was due to newsflow suggesting the US and China will finally sign a partial trade deal this month that will put an end to the 18-month trade war.

  • US-China trade deal could be delayed until December
  • Bank of England to keep rates unchanged
  • Sterling traders focused on MPC votes

The latest reports suggest both President Donald Trump and Xi Jinping may not sign the Phase I trade deal until December as the parties seem to be in disagreement over where and when the deal should be signed. This shouldn’t be a big surprise given the history of tensions between the two countries. My concern is not the delay, as a few more days to sign the agreement won’t make a big difference. But, whether there are deeper conflicts within the agreement itself is my main concern, particularly the scale of tariff rollbacks that China may be asking for. China is now likely to consider itself in a better position given Trump’s impeachment inquiry and as we get closer to the US 2020 presidential elections. Investors will be in wait and see mode until a venue and a date is announced. Until then, expect equities to retreat from their multi-month and record highs.

Currency traders will be focused on Sterling today as the Bank of England (BoE) announces its policy decision. In its September meeting, the central bank said it might consider a rate cut even if a no-deal Brexit is avoided on October 31. Since then, data has shown a mixed picture of the economy and is not likely to trigger a rate cut.

Despite the bank being expected to keep the key rate unchanged today,  it will be interesting to see if one or two members of the MPC vote for a rate cut. Such a vote would suggest that the BoE is tilting towards a more dovish stance in monetary policy and will increase the odds of a rate cut early next year. Any signs of the BoE indicating an easing policy will likely lead to a further selloff in the Pound.

Markets steady ahead of NFP

Asian markets edged cautiously higher on Friday as investors took heart from President Donald Trump's latest remarks on US-China trade negotiations...

Trump tariff threats blunt risk appetite

Asian stocks erased Monday's gains following the selloff in US equities overnight, as US President Donald Trump appeared to have launched...

Gold treads water on US-China trade doubts

Gold's price action on Thursday was reminiscent of watching paint dry despite Donald Trump signing a bill backing Hong Kong protesters...

Asian assets mixed despite US equities

Asian stocks and currencies are mixed, even though US equities notched new record highs following President Donald Trump's latest assessment...

Risk appetite bolstered by trade optimism

A wave of positivity is sweeping across financial markets on renewed signs of momentum in trade talks between the United States and China...

China seeks to rein in IP theft

Asian stocks are starting the week on a positive note while US equities futures are also pointing higher, as investors take into account China's latest...

Asian assets post gains

Most Asian stocks and currencies are advancing, despite the S&P 500 having slipped further from its record high, as investors are fed a string

US China reconciliation stutters

Asian stocks are painting a sea of red, as investors grow skeptical that the US and China can exhibit enough will to sign a limited trade deal by next month...

Asian equities unable to keep up with US stocks climb

Asian stocks are mixed, unable to stay in lockstep with their US counterparts which marched on to post fresh record highs...