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.


Source  
What's next after Q2 rally?1 Jul, 2020  

Risk appetite is stepping hesitantly into the second half of the year, with Asian stocks edging higher while US futures slipped into the red...

FX Scorecard: Winners and Losers of 2020 so far30 Jun, 2020  

So much has happened since the start of 2020. The shocking events across the globe sparked explosive movements across currency, commodity and stock...

Markets still sensitive to Covid-19 fears29 Jun, 2020  

US stocks are set to pare some of Friday's declines, with futures edging into positive territory at the start of the week. Asian stocks are however lower...


More volatility ahead as virus spreads29 Jun, 2020  

Coronavirus deaths topped 500,000 worldwide, is the first headline to grab investors' attention this morning. The mission is unaccomplished and the virus...

Stock market star to scandal26 Jun, 2020  

Market sentiment is mixed today with US stocks opening lower, but so far being well supported by the widely watched 200-day moving average...

The Russell Rebalance Roiler?26 Jun, 2020  

US stock markets could see a massive spike in trading volume today, as the Russell indexes reconstitution takes place. The once-a-year process...


The bull market is showing signs of weakness25 Jun, 2020  

One of the biggest lessons learnt over the past three months is to respect the trend. Whether you believe the economy will go through a V, U, W, L or whatever...

Is tariff man back?24 Jun, 2020  

Risk appetite has suffered today in choppy and changeable market conditions. News that the Trump Administration is considering the imposition of tariffs on $3.1bn...

Rising tide lifts (almost) all boats24 Jun, 2020  

As we take stock of what has transpired in global markets this quarter, risk sentiment has certainly made a remarkable comeback despite the coronavirus pandemic...