Chinese stock exchanges get bullish on Donald Trump message

Posted 26 February, 2019

On Sunday, US President Donald Trump announced he would postpone the increase in import duties on Chinese commodities which was scheduled to come into force on March 1. He cited notable progress in negotiations with China on a number of important issues, including protection of intellectual property, technology transfers, agriculture, services, and currency. If negotiations continue this way, the US President is going to meet Xi Jinping to sign an agreement.

The trade confrontation affected not only the two countries but many others, especially given the fact that it occurred when the economic cycle approached the peak. While China wants to avoid a hard landing, Trump is willing to fulfil one of his main promises during his election campaign and cut the trade deficit. He needs to prevent a plunge in US economic growth and close an agreement, even not an ideal one.

The developments supported stock markets in mainland China the most. The CSI 300 index rose by 4% today, reaching the highest level since June 2018. It is showing bullish signs, rising by more than 23% from the January bottom. Meanwhile, RMB gained 0.4%, touching 7-month peak.

Increasing demand for risky assets positively influenced such AUD and NZD, which rose 0.3% each during the Asian session. Other currencies reacted more discreetly, with EUR, GBP, and JPY traded in very narrow ranges.

For reference, Theresa May’s decision to postpone the vote in parliament on her proposed Brexit agreement had almost no impact on GBP on Monday. The vote was scheduled for Wednesday, but May postponed into March 12. The likelihood of postponing Brexit is increasing day by day, and May is reportedly considering to delay it for 2 more months. GBP is likely to stay around $1.30 in the short term until the UK exits the EU.

Although politics remains the main driver of trading in financial markets, this week is rich in key economic data. After the US data on retail sales, orders for durable goods, sales in the secondary housing market and a few more reports were worse than expected, the markets will study the US GDP growth rate in Q4 which will be released on Thursday. The annual GDP growth is expected to decline to 2.4% from 3.4% seen in Q3. Given the negative developments in recent weeks, there GDP growth may be lower than expected. The personal consumption expenditures price index (PCE), the Federal Reserve's preferred inflation indicator, and personal income data will be published on Friday. 

Previous forecast

27 February, 2019 15:49

← Brexit delay prospects fuel sterling pound upturn

Bullish investors are getting more confident as for the sterling pound growth amid the news that UK PM Theresa May may postpone the Brexit from March 29 to a later date. The development will ease uncertainty around the issue as well as concerns that the UK may exit the EU without any agreement in March. Nevertheless, the delay brings the risk that the UK will end up in limbo. Although the pound may keep on increasing amid expectations of the delay, its mid- and long-term prospects are still dimmed.  The US dollar in its turn has been slack lately.

Brexit delay prospects fuel sterling pound upturn

Next forecast

26 February, 2019 14:29

US President Donald Trump calls upon oil cartel to slow down →

Oil prices have gained some 35% on the active strengthening over the past few months. Brent oil prices have soared practically to $68/bbl over the past two months. The increase observed over the past two months was driven by the US sanctions against Venezuela which hosts increasing reserves of unsold oil along with tighter measures against Iran. However, the market believes that the key reason behind the upturn was production reduction by OPEC members.

US President Donald Trump calls upon oil cartel to slow down
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