Equities Decline on Trade Deal Delay, Tariff Headlines in Focus

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

Sino-US trade talks

Equities Decline on Trade Deal Delay, Tariff Headlines in Focus

December 4, 2019

Sino-U.S. trade deal delay and concerns of a fresh trade war between US and EU weigh down investor sentiment, fresh headlines awaited ahead of major geopolitical events. 

Summary: The global financial market took a share dovish blow following US President Trump’s latest tariff and trade deal moves. Following comments from President Trump stating that Hong Kong bill doesn’t help the Chinese trade deal and that the deal will have to wait until after U.S. Presidential Elections scheduled for November next year, broad-based investor sentiment took a deep bearish dive.

As all hopes for a swift resolution of trade war evaporated, the outlook for global economic growth crashed causing major risk assets and indices to decline in Asian markets.

Trade Deal Delay
French wine

Later in the day, the European market also saw risk assets and key indices crash sharply over President Trump’s threats against France on duties of up to 100% over imports of Champagne, handbags and other French products worth over 2.4 Billion USD.

Trump’s comments criticizing major NATO allies France and Germany ahead of the anniversary meeting also caused risk sentiment to decline sharply.

In the Forex market, major currency pairs are trading flat as the cautious mood in the market has led to directionless price activity.

Precious Metals: Rare metals are seeing a sharp spike in an upward moment over escalating tensions between the EU & the US. Also, news of a delay in the trade deal for nearly a year boosted demand for safe-haven metals causing the price of both gold and silver to trade with positive bias across the day. 

Crude Oil: Crude oil price saw sharp declines as latest developments hint at the possibility of a new trade war erupting between the US and the EU just when the US & China trade deal has been delayed by a year. This greatly affected global growth outlook which in-turn affected demand to supply ratio for crude oil consumption weighing down the price of liquid gold. Traders now await US weekly inventory data for short term directional cues.

AUD/USD: The pair initially saw positive activity on Post RBA led price momentum pushing the price to 3-week tops. However, gains were capped as investor sentiment turned risk-averse over the latest developments surrounding the Sino-U.S. trade deal and signs of a fresh trade war erupting between the US and the EU. Traders await further headlines for directional cues leading the pair to consolidate near intra-day highs.

Trade Deal Delay
France and the EU

On The Lookout: All focus is now on fresh updates from the US market following the latest comments from US President Donald Trump which caused a huge wave of dovish influence to wash over the market. Following Trump’s threats on imposing a tariff on French luxury goods and criticizing comments made against  USA’s NATO allies, both EU & France replied with a threat for full retaliation against the US should President Trump act on his recent threats.

This caused worries of a new trade war erupting while the ongoing trade war is yet to be resolved. On the Sino-U.S. trade war front, Trump’s comments stating China may have to wait until after upcoming US Presidential elections came as a major blow causing traders to hope for fresh updates from the US market which can help offset the recent decline.

UK election polls show conservatives widening the gap against labor as news of Trump’s visit to London hits the headlines. On the macro calendar front, the US calendar is silent aside from the release of API weekly crude oil inventory data. 

Trading Perspective: Wall Street futures trading in the international market saw sharp declines ahead of US market hours as global investor sentiment took a hit over the latest comments from President Trump on tariff measures against major global economies. This along with prevalent cautious sentiment likely to keep Wall Street indices and equities under pressure unless headlines from US market hours today helps ease damage from recent tariff threats. 

EUR/USD: The pair is trading mostly flat but has managed to retain positive bias across the day and remains steady above mid-1.10 handle as USD lacked the strength to create a downward price breakout despite broad-based caution. Trade war and tariff-related concerns keep investors in edge as traders await further headlines from the USA for short term directional bias.

GBP/USD: The pair is trading positive and has managed to scale fresh multi-week highs above 1.30 handle as the latest opinion polls show that Conservatives have managed to widen the gap against the labor party ahead of US President Trump’s visit to the UK. Traders now await fresh headlines from the USA for short term directional bias.

USD/CAD: Broad-based cautious risk-averse investor sentiment has caused Canadian Dollar to come under pressure. Developments in the global trade war and tariff threats caused Crude oil prices to decline ahead of OPEC meeting adding pressure to CAD. Traders now await US headlines for short term profit opportunities ahead of tomorrow’s BOC interest rate decision update for directional bias. 

Please feel free to share your thoughts with us in the comments below. 

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