US-China deadline extension helps markets

The US and China may be nudging closer towards finding some middle ground in their nearly year-long trade dispute, a resolution that would give markets some breathing space going forward and potentially even reverse some parts of the global economic slowdown.

The US and China may be nudging closer towards finding some middle ground in their nearly year-long trade dispute, a resolution that would give markets some breathing space going forward and potentially even reverse some parts of the global economic slowdown. 

President Trump indicated yesterday that he might extend the 1 March deadline for the two sides to reach an agreement if it seems that enough progress has been made in their bilateral talks and thus avert the planned introduction of yet more trade tariffs on Chinese goods. Chinese stock markets cheered with a 2% increase to a multi-month high in early trade and European markets followed with a rally, particularly in Germany where a lot of car producers and industrials depend on exports to China. In London, Rolls Royce and luxury brand Burberry were high up among the gainers, as were metals and mining companies.

Congress border deal boosts US stocks

The US government narrowly avoided a shutdown scheduled for this week thanks to a face-saving deal between President Trump and the Congress which allows both sides to claim success. Instead of the $5.7 billion worth of funding to finance the building of a wall on the US border with Mexico Congress agreed to provide $1.375 billion for border security, offering a way out of the impasse that has been paralysing US government offices since December. 

The decision brought palpable relief to US markets and continued to boost Asian and European stocks this morning. The dollar’s reaction was mixed as it firmed slightly against the yen but nudged into weaker territory against the euro and sterling.

Brexit uncertainty continues

The pound is left without clear direction as Britain seems no closer to any clarity over Brexit. Sterling is almost flat against the dollar and marginally stronger against the euro but the strengthening seems more temporary than a clear trend. 

The Prime Minister is due to present her updated Brexit proposal to the Commons today with changes from the EU on the Northern Ireland backstop and in theory this is due to be followed by a Valentine’s Day debate on the update. But comments from Brussels and the opposition are not providing much hope for a resolution.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (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.