Friday, December 13, 2019

US and China look set for phase one agreement on trade; Conservatives may actually regain majority in the UK

Tags
  • China
  • Dollar
  • Gold
  • Pound
  • Stocks

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US equities spiked up after the US and China was reported to have a deal in principle. US equities surged on Thursday after Bloomberg reported that people familiar with trade talks between the US and China said that the two superpowers have reached a phase one trade deal in principle. It was also reported that US negotiators have agreed to cut 50% off tariffs on US$360bn worth of Chinese imports in exchange for China to agree to increase its purchase amount for US agricultural goods and enhance its intellectual property rights laws.

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Safe haven assets retreated on the news of a potential trade deal. But the news of a trade deal between the US and China put downward pressure on safe haven assets, as investors shifted to more risky assets. Gold, yen and US Treasuries all retreated on Thursday.

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Aussie and Kiwi gains against the dollar. The greenback gained against most major currencies except the Australian and New Zealand dollar on Thursday. The Aussie and Kiwi both gained against the dollar as the phase one trade deal will potential relieve the two currencies of the negative impact of the trade war.

Conservatives look set for election victory. Sterling rose on Thursday to the highest since June 2018 ahead of the election outcome after exit polls showed that the Conservative Party was on its way to win 368 out of 650 seats in the general elections.

Lagarde only reiterates plan for framework review at first policy meeting. European Central Bank (ECB) President Christine Lagarde mostly reiterated the ECB's plan to review its monetary policy framework. Lagarde said that the review will commence next month and last a year. Economic forecasts for the central bank did not change. The euro was flat against the dollar on Thursday as a result.

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Major Asian equities tracks US gains. Asian equities will likely make gains as well, with the Nikkei and Straits Times Index both starting Friday's trading session higher.

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