Wall Street

Wall Street to Open Soft as Reports Hint at Lack of Progress in Trade Talks

Wall Street
US and China trade talks

Trade talk headlines eyed following conflicting reports from leading news media outlets. Macro data to provide short term trading cues. 

Summary: US Wall Street closed on a positive note yesterday as trade talks between China and the US began in Washington. However, reports stating that no-progress were made on first-day trade talks caused investor sentiment in the global market to turn sour resulting in Asian and European markets seeing mixed price action in the stock market.

Reports from South China morning post which stated that Chinese delegation headed by Vice Premier Liu He was planning to leave after just first day’s talk instead of planned departure on Friday which suggested talks went in a pretty unsavoury direction. This comes as a major blow as fallout in trade talks could result in serious economic loss for both nations as well as major global economies as evident from the developments in recent past. However, lingering hopes on trade talks given the fact that trade talks seem likely to resume today kept declines in check.

The European market is seeing some level of positive support influenced by gains in luxury goods shares, but gains were still capped on account of caution surrounding Sino-U.S. trade talks. In the forex market, USD denominated major global currency pairs continue to trade positive on weak USD while EM currencies suffered on caution influenced by trade war woes. 

Precious Metals: Precious metals trade positive as headlines hint at lack of progress and possible fallout between China and U.S. Yellow metal gained a firm boost, and price reached one week highs as demand for safe-haven assets and weaker USD underpinned precious metal bulls. 

Crude Oil: Crude oil price holds steady as talks between China and the USA are underway. However, gains were capped on account of unsavoury developments in trade talks. Meanwhile, demand to supply ration amid ongoing OPEC production and supply cut agreement amid middle eastern tensions underpin crude oil bulls. 

AUD/USD: The Australian Dollar continues to trade positive on USD’s weakness. Further, reports on the US considering a partial deal with China helped improve the mood around trade talks which added strength to Chinese proxy as traders await US CPI data for short term trading opportunity. 

On The Lookout: Sino-U.S. trade talks remain as the main focus of global investors today. Conflicting headlines surrounding trade talks between two nations keep traders on edge of their seats. While Chinese daily hinted at lack of progress in talks and possibility of Chinese delegates departing from the USA earlier than planned, Bloomberg website published an article according to which White House in considering the possibility of rolling out a previously agreed currency pact with China which could also help prevent tariff hike next week. This suggests that partial trade deal between two nations are highly likely which if comes true could help market mood improve in favor of risk on trading activity.

In Brexit front, EU leaders criticise the UK’s latest proposal while suggesting that further talks are necessary to prevent a no-deal Brexit outcome. Tensions in the Middle East continue to rise as Turkey makes a move on Kurdish fighters in northeast Syria. Traders now wait for macro data updates for short term profit opportunities. 

Trading Perspective: Weak USD on account of ongoing trade talks between China and the USA are likely to keep major global currencies trading positive. US stock and index futures trading in the international market were down ahead of Wall Street opening as investor mood is cautious ahead of trade talks between China and USA delegates given lack of progress during their trade talks yesterday. 

EUR/USD: The pair is trading positive as Common currency receives positive support from contradicting headlines surrounding Sino-U.S. trade talks and weaker USD in the global market resulting in price being steady above 1.10 handle. Traders now await US data release and trade talk headlines for short term profit opportunities. 

GBP/USD: The pair is trading with clear positive bias well above 1.22 handle as GBP bulls remain supported on news of Boris and Varadkar meeting for critical talks. Weaker USD also adds support to GBP bulls. Traders now await US data release and trade talk headlines for short term profit opportunities. 

USD/CAD: The pair is trading with clear bearish bias in price momentum as visible from steady price movement below the mid-1.33 handle. Positive Crude oil price movement in the global market along with weaker USD underpins commodity-linked currency Canadian Loonie. Traders now await US data release and trade talk headlines for short term profit opportunities. 

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