The investment world resumed its pro-growth stance in overnight trading. Shares and industrial commodities rallied, and bonds sold off as investors seemed prepared to ignore further risks from trade disruption. Instead the focus turned to the upcoming global stock reporting seasons.
The “sell the rumour, buy the fact” reaction to the introduction of wider trade barriers between the US and China suggests investors will wait for the evidence that trade wars are hurting corporate bottom lines. The direct economic impact is calculated as a dip in GDP growth, rather than a cataclysm. By ignoring potential knock on effects to confidence and activity markets are able to shift back to a positive outlook.
This swing in global sentiment is pushing regional futures markets higher. However good gains yesterday may limit upside today. The surge in copper, aluminium and nickel prices justified the leadership of materials shares, and could see further gain today.
Financial and energy stocks lifted markets in overnight action. Interest rate sensitive sectors, such as utilities, were shunned. The same dynamics could play out across the Asia Pacific region today. Chinese inflation data due mid-session is unlikely to divert trade.