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Trade tide turns

Unconfirmed reports that the US Treasury Secretary sought trade talks with China short circuited negative market sentiment in overnight trading. China exposed markets rallied strongly. Industrial metals leapt higher, shares recovered and bonds held firm at higher yields. The US dollar slipped against all currencies.

Other developments point to a turning of momentum in trade negotiations. Pictures of China’s President Xi making pancakes with Russia’s Prime Minister Putin graph starkly illustrated the principle that “my enemy’s enemy is my friend” and the efforts made by China to broaden trade relations. US President Trump’s twitter account focussed solely on domestic matters, in stark contrast to earlier fusillades at any trade moves.

The strong stand taken by China, and other US trade partners like Canada, suggest the wheels are coming off the White House’s earlier strategy of publicly berating its counterparts.

Hang Seng futures rose 1.5% overnight in a dramatic turnaround of the 20% + slide from all-time highs in February. Shares in the Asia Pacific have suffered more than any other region from the trade disputes. This may mean outperformance as the balance tips. 2%-3% gains in industrial metals will likely support resource sectors today, and could see closing gains despite the night session drop in Australia 200 index futures.

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