Reports of a potential limited trade deal between China and the US soothed investor nerves overnight. Shares snapped back after the torrid previous session. The minutes of the US Federal Reserve’s Open Market Committee September meeting showed more members remain in accommodation mode. Longer bonds sold off despite the dovish tone, suggesting some traders were looking for greater discussion of a potential re-start of quantitative easing.
Unnamed China officials suggested a limited deal is on the table at tonight’s high-level meeting in Washington. Expectations revolve around more agricultural purchases by China in return for no further tariffs. A later suggestion that nothing concrete is likely tonight saw US stocks give up some earlier gains, although the SP500 index still closed almost 1% higher.
Discussions around inflation management featured at the most recent Fed meeting. Although interest rate projections showed doves continue to dominate the hawks, the focus on future policy may have disappointed those looking for a new bond purchase program.
Asia Pacific stocks are set for opening gains, led by IT and resources stocks. Australian home lending data due later this morning is expected to show lending grew by 2.3% August. RBA rate cuts and a consequent bounce in home prices are the likely drivers.