Equities Mixed As Trade Talks Resume, Updates Awaited

The US move to blacklist Chinese firms dampens investor sentiment which is already weighed down by caution ahead of the start of trade talks later today. 

Summary: US Wall Street yesterday saw major benchmark indices and stocks close on a dovish note as investors took a cautious stance ahead of trade talks between China and U.S.A. However, Asian markets saw major indices and key equities trade and close on a positive note as investors were optimistic about the possibility of positive progress in trade talks given the recent trade deal between the US and China.

Chinese market resumed trading activity following a brief period of holiday celebrations which gave the global market a fresh bout of price volatility and a boost in trading volume. Following positive cues from the Asian market, the European market saw major indices and stocks open on positive note and trade with bullish bias in early trading session with market bulls seeing further support in form of positive macro data from Germany. However, profit booking activity from speculative traders as trade talks between high-level representatives of the US and China are set to begin in Washington, U.S.A. later today. While USD gained strength on caution ahead of trade talks in immediate and recent past, it lost most of its gains today given investors profit booking activity and change in short term bet patterns as trade talks begin later today. 

Precious Metals: Rare metals are seeing positive price action in the global market as trade talks between China and the USA are set to resume today. Further, the decline in USD’s strength in the global market also played a supportive role for gains in the precious metals market today. 

Crude Oil: Crude oil prices fell in the global market as investors took a cautious stance ahead of high-level trade talks between Sino-U.S. representatives later today. Sour investor mood on latest developments following US blacklisting of Chinese firms ahead of trade talks also weighed down crude oil bulls. 

AUD/USD: While the pair was trading with dovish prospects earlier today, it has gained positive momentum following a decline in USD’s strength in the global market. However, gains were capped as trade talk optimism faded on the latest move by Trump’s administration ahead of trade talks later today. 

On The Lookout: All eyes are now on Sino-U.S. trade talks which is set to start later today in Washington, with representatives from both nations sitting together for face to face negotiations on trade and national security-related issues. However, optimistic investor sentiment in the global market which existed until Asian market hours today faded following update from the USA which stated that Trump administration has blacklisted several new Chinese firms just ahead of trade talks which is seen as an act of dealing in bad faith and a threaten tactics. Given Chinese statements and reaction to Trump’s antics so far, this move is likely to result in some sort of fallout in trade talks set to begin today unless some serious compromises are offered by the USA which seems highly unlikely at this point.

Boris and Angela

On Brexit front, as talks head towards the critical point, comments from UK PM Boris Johnson just resulted in odds of no-deal Brexit shooting up as he stated that deal with EU seems highly unlikely following his recent phone call with German Chancellor Angela Merkel. On the release front, aside from Sino-U.S. trade talks, there are no major geopolitical events. US calendar sees the release of PPI data and speech from fed Chair Jerome Powell while Canadian Calendar sees the release of Housing starts and building permits data. 

Trading Perspective: As USD weakened in the global market, major global currencies made some headway but price action was mostly range-bound. EM currencies saw a mixed reaction to weaker USD as caution remained high ahead of Sino-U.S. trade talks. US stock and index futures trading in the international market ahead of Wall Street opening declined following the act on bad faith from Trump administration which blacklisted several new Chinese firms ahead of high-level trade talks. Further, cues from the decline in Boeing shares on concerns over its grounded 737MAX jets were also cause for concerns that suggest US Wall Street is set to see a subdued opening and cautious price action in trading session today. 

EUR/USD: The pair is trading range-bound with price trapped well inside familiar price range below 1.10 handle as caution ahead of high-level Sino-U.S. trade talks weigh down EURO bulls. But weaker USD continues to underpin EURO bulls keeping price action steady with a slight bullish edge. Traders now await updates on trade talks, US data and Powell Speech for short term profit opportunities. 

GBP/USD: The pair is trading with dovish bias in the global market today as odds of no-deal Brexit spiked. PM Johnson’s comments post phone call with German Chancellor Angela Merkel during which he stated odds of no-deal Brexit is high weighed down GBP bulls offsetting positive influence from weaker USD. Traders now await updates on trade talks, US data and Powell Speech for short term profit opportunities.

USD/CAD: The pair is trading flat on mixed signals on key events. Canadian Loonie – the commodity-linked currency lost its edge as Crude oil price declined in the global market today. However, Weaker USD resulted in the pair trading with a lack of clear directional bias resulting in flat price movement. Traders now await updates on trade talks, Canada & US data and Powell Speech for short term profit opportunities.

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