Traders are waking up to green across the screen. Global indexes are all rising as trade optimism is high for a mini-deal, more likely a trade truce will be reached. This is a critical for the US-China trade war as investors are hoping we do not see a repeat outcome of what happened when negotiations fell apart. President Trump saidi talks with China went ‘very well and currently plans to meet with China Vice Premier Liu He at 2:45 pm EST.
A mini-deal could provide a strong bid for US equities, but the details will determine if we get another run to record territory. If today’s outcome yields no tariff reductions, but a currency pact and China’s further commitment to buying agricultural goods, we could see the stock rally be short-lived. A total collapse in trade talks could see the S&P 500 futures fall to correction territory and the Chinese yuan weaken towards 7.4.
The British pound is rising after EU Chief negotiator Barnier reportedly got the go-ahead to tunnel negotiations, the chance for both sides to talk in secret about drafts of the legal text for a Brexit deal. If the 27 member states are content with the recent progress, it seems the chances of PM Johnson getting a Brexit deal are on the rise. The risks for no-deal still remain, but these constructive developments are having many traders abandon short-term bets.
Oil is surging today as geopolitical risks in the world’s key crude-producing region saw an Iranian tanker attacked in the Red Sea. Oil positions were fairly light going into the week and we could see the recent fundamentals help drive the energy market higher over the next week. A trade deal and renewed worries of supply outages and tanker attacks in the Middle East should provide a nice backdrop for higher crude prices.
Gold just needs to withstand the market relief that comes from a mini-trade deal. Poised for a weekly decline, gold prices should regain footing next week as investors probably scrutinized the band-aid trade solution. Gold should be supported on global stimulus bets and skepticism a broader trade deal won’t be reached until after the election.