It seems that investor sentiment is turning more and more optimistic. Asian shares, have turn positive with both Hong Kong and China mainland indices turning into green. The USD also gained strength, with the dollar index at 97.51 (+0.15%) as the sino-american trade conflict appears to be deescalating (from the investors’ perspective).
Indeed, one day after Trump’s tough statement concerning the negotiation with Chinese counterparts and the threat of intensifying trade duties, White House economic adviser, Larry Kudlow, has reversed the outlook of the trade talks during the G20 summit in Argentina. Larry Kudlow mentioned the possibility that the two leaders would have constructive discussions and that they could come up with an agreement on the table. We remain dubitative that such an agreement could be reached within in such a short period of time, although negotiations have been starting since a few weeks prior to the event. The outcome of the meeting will most certainly be more intense negotiations and, at best, a postponement of 25% tariffs on $ 200 billion Chinese imports.
Following the announcement, US equities have been bouncing back into positive territory at closing despite a start in the red during yesterday’s session. The blue-chip Dow Jones Industrial Average index closed at +0.44% while the S&P 500 and tech NASDAQ indexes closed at +0.33% and +0.01%. Asian indexes followed the same trend, with the Japanese Nikkei 225 closing +1.02%, Hong Kong Hang Seng +1.33% and China mainland CSI 300 +1.33%, as well, its highest close since 2. November (+3.56%).
Accordingly, USD/CNY is bouncing higher, gaining +0.20% since yesterday. Today’s PboC fixing at 6.95 (prior: 6.9463) suggests further pressure on both CNY and CNH.
