Trump China threats set the tone for morning trade

Donald Trump’s renewed threats against China ahead of this week’s G20 summit have rattled European and Asian markets this morning but European indices are beginning to turn the corner and head towards positive territory on a mixture of encouraging company news and comments from ECB head Mario Draghi.

G20 will be key for a number of markets

Preparing the ground for the talks with his Chinese counterpart Xi Jinping this Saturday President Trump has laid out his threats. He plans to increase tariffs to 25% on $200 billion in Chinese-made goods if a deal is not reached and potentially bringing in tariffs on imports of iPhones and Macbooks made in China. While China is not budging on the tariff front – it is responding in kind to any US tariff increases– the country has been addressing the issue of opening up to foreign investments and companies. Recently American Express has been allowed to set up a card-clearing service in the country and German insurer Allianz became the first wholly foreign-owned insurance firm in China. A positive outcome of the US-China talks would not only help major tech companies – Apple shares dropped 2% overnight after Trump’s comments – but also commodities and commodity related industries, as China is a major global importer.

The meetings between G20 heads of state will be crucial for a number of other markets, not least oil. Crude prices are on the decline again with Brent crude slipping briefly below $60 as Saudi Arabia raised output to an all-time high in November. The two key G20 oil players, the US and Russia, are more likely work towards lower oil prices as the US is keen to see low oil prices that will protect domestic consumers while Russia wants to keep production high to maintain its oil revenue.

Euro struggles after Draghi comments

The euro strengthened against the pound but yielded some ground to the dollar after the head of the ECB Mario Draghi said the bank will proceed with plans to start phasing out its debt buying programme despite criticism that it is too soon for the declining Eurozone economy to lose its support.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.