Trade negotiation process soothes markets

CMC Markets

Positive trade comments both China and the US eased market concerns about global disruption. In overnight trading bond yields rose again, shares rallied led by higher growth companies and industrial commodities added to recent gains. A concerted effort from both countries to manage market expectations towards a longer negotiation was well accepted.

President Trump told a cabinet meeting that China “had already started” buying US agricultural goods, but Commerce Secretary Wilbur Ross managed the public messaging. Ross emphasised that there is at this stage only a preliminary agreement, and that the substance of a trade deal would come in later phases of the negotiations. This matched earlier conservative commentary from Beijing. It is now clear to investors that a comprehensive trade agreement will require many months of discussion.

However the clear commitment of both countries to an emerging negotiation timetable prompted further pro-growth market action.

Meanwhile in the UK the Speaker of the House refused debate on Brexit on the basis parliament considered the Prime Minister’s motion on Saturday. The potential for a no-deal Brexit is reduced, but the delay makes an October 31 exit less likely. The conflicting developments saw Sterling hover at five-month highs.

Asia Pacific markets are set for modest opening gains. Light volumes yesterday reflected investor caution. Stronger energy and copper prices may support further buying.