Market Analysis

Risk assets in rally mode over Sino-U.S trade deal optimism

Global equity markets and riskier asset classes enjoyed a strong move higher on Wednesday over the latest reports from Washington that suggest China and the United States are getting closer to agreeing on a trade deal. Officials from both sides are said to have ironed out the main problems that have so far prevented them from making a deal.

Risk-on trading sentiment returned in abundance when the United States Chamber of Commerce Myron Brilliant told reporters that ninety percent of the trade deal had already been done. Equity market on both sides of the Atlantic advanced on the trade deal news, while currency traders bought the Australian Dollar on hopes that a deal was nearing.

Officials from Beijing and Washington have said the main outstanding issues to agree on are protection for U.S intellectual property rights and creating an enforcement mechanism that ensures China sticks to its commitments inside the new trade agreement. China has also reportedly asked for an immediate lifting of the current trade tariffs imposed on Chinese exports into the United States.
U.S President Trump has stated that the main aim of the Trump administration is to create a trading environment with China that focuses on a mutually beneficial and reciprocal trade agreement. President Trump has also been vocal in stating that China must reduce its goods trade surplus with the United States, which hit a record $419.2 billion last year.

Financial markets attention now turns to United States Trade Representative Robert Lighthizer and U.S Treasury Secretary Steve Mnuchin who are set to start talks with the Chinese vice-premier today. If a deal can be agreed upon, it likely that U.S President Donald Trump will travel to China and officially sign the deal with Chinese President Xi Jingping.


USIndJune19 Daily Mountain Chart | Source: ActivTrader

USIndJune19 Daily Mountain Chart | Source: ActivTrader 


The Dow Jones Industrial Average advanced sharply higher on hopes of a trade deal on Wednesday, with the Dow Jones reaching technical levels not seen since October 2018. The major U.S index is at a critical juncture technically, as it approaches its all-time price-high set during the last quarter of 2018. Rejection from current levels may ignite a large head and shoulders patterns, while a move above the all-time is likely to prompt a wave of buying interest.


Written by Nathan Batchelor, External Analyst

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