Daily Market Color

Trade Concerns Ease, Boost Risk Assets


More Trade Positivity

For the second time this week trade negotiations between the US and China were regarded with a bit more optimism.  Today’s positivity followed a direct conversation between President Trump and Chinese President Xi Jinping, the first such occurrence in several months:
Trump’s tweet- “Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade.  Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had a good discussion on North Korea!”
Xi’s comments on Chinese TV – “The two countries’ trade teams should strengthen contact and conduct consultations on issues of concern to both sides, and promote a plan that both can accept to reach a consensus on the China-U.S. trade issue”
The leaders of the world’s two largest economies are expected to meet face to face at the G-20 Summit in Argentina scheduled for the end of this month.  President Trump has already set the expectation to impose tariffs on another $267 billion worth of imports if a deal cannot be struck by the end of such time.



Equities are Going Streaking!

US financial markets reacted favorably to trade-friendly news, as all three major stock indices posted their third straight day of gains.  The tech-heavy Nasdaq led the way with a 1.75% rise, albeit shares in Apple are currently down more than 4% in after hours trading following the release of the company’s quarterly earnings.  The DJIA and S&P 500 posted more modest gains of 1.06% each, led by increases in the materials sector.  US Treasurys held within a tight range throughout the session, with yields/swap rates finishing 1-2bps lower across the curve.  Meanwhile in commodity markets, crude oil prices couldn’t curb their selloff as WTI futures tumbled more than 2% on the day.  A barrel of WTI is now trading near $63.70, its lowest level in the past seven months.



Bank of England Holds Rates Steady (For Now)

Today England’s central bank concluded its monetary policy meeting with the decision to leave benchmark borrowing rates unchanged at 0.75%, the level that has been in place since August when the MPC hiked by a quarter point for only the second time since the 2008 financial crisis.  The hold decision was widely anticipated by financial markets, however the statement and commentary afterwards was a bit more hawkish than previous guidance.  While the BOE stated that rate rises would be “gradual”, it also set 1.5% as the target rate to reach over the next three years – 50bps higher than the projections provided three months earlier.  The major uncertainty for the nation remains Brexit negotiations, specifically “new trading arrangements, the smoothness of the transition to them and the responses of households, businesses and financial markets,” the MPC stated.


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