• More talks bode well for eventual trade deal
  • Progress hindered should President Trump support HK protests
  • Market focus on PMIs in euro area and US
  • Brent moderates after hitting 2-month high on trade optimism

Asian stocks and currencies are mixed, with the S&P 500 having slipped further from its record high, as investors are fed a string of conflicting signals on the US-China trade deal. Media reports suggest a fresh round of trade talks in Beijing is on the cards, as well as a possible postponement of tariffs slated for December. However, US President Donald Trump’s potential support for the Hong Kong protests may complicate the path towards reconciliation between the world’s two largest economies. Gold is holding around the mid-$1460s while the Japanese Yen continues to trade below the psychological 109.0 level versus the US dollar.

Investors are mindful of the trade deal’s importance in supporting hopes of a global economic recovery next year, even as they take into account the OECD’s lowered forecasts which point to a lackluster 2.9 percent global GDP for this year and 2020. A further escalation in trade tensions would only undermine the world economy’s growth momentum while amplifying chatter about a recession, which would weigh negatively on emerging-market assets and bolster demand for safe havens.

EUR/USD holds above 1.10 ahead of PMIs

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The Euro has remained within a tight range against the US Dollar this week, as investors now lookahead to the PMI data releases out of EU member countries. With Germany having just avoided a technical recession in Q3, investors will be looking for signs on whether the worst is over for its manufacturing sector, which last month remained firmly in contraction territory.However, anyindication that the manufacturing slump may have bottomed out could translate into limited gains for EURUSD as we will only see more upside upon greater certainty surrounding the US-China trade deal.

Brent cools after surging to 2-month high

Brent futures breached the $64/bbl mark for the first time since the mid-September attacks on Saudi Arabia’s oil assets, before paring recent gains. Brent is still on course to register three consecutive weeks of gains, due to the relatively staunch optimism that a US-China trade deal remains a likely scenario.

As long as the US and China keep engaging positively with one another, Oil is likely to hang on to most of its recent gains. However, the risk of another flare-up in US-China tensions cannot be fully ruled out at this juncture, which leaves Oil prices vulnerable to developments surrounding the trade-talks.

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