Global stock markets had a good start to the week as hopes increased of a positive meeting between President’s Trump and Xi at the G20 summit. Asian markets once again led the charge brushing off a weak finish to Friday’s trading with the Japanese and HK indices pushing higher early in the day, both European bourses and US markets drove higher off the positive momentum. The tech sector led the way in the US as the Nasdaq closed up over 2% with the Dow and S&P also having strong days, both finishing near 1.5% in the black. The dollar gained ground across the board especially against the Yen with the Dxy trading back up above 97.00. Oil also gained a bit of respite with WTI bouncing back north of $51/b having threatened to break the 50 level earlier in the day.
As expected, global growth sentiment is continuing to drive markets and we’ve seen a bit of a turn this morning as the market once again digested comments from President Trump in the WSJ advising that he will probably go ahead with tariff increases to 25%. He is prepared to add further tariffs if negotiations don’t produce a trade deal at the G20 and he added that the only deal acceptable to the US is for China to completely open it’s economy to allow US firms to compete fairly. Analysts have already advised how important this meeting is for the world economy going forward and these comments do little to allay market fears of an escalation in the trade war. Comments from China recently have been a lot stronger on the issue and it’s highly unlikely that China will look to totally open it’s borders to international competition and this could lead to a very short and unfulfilling meeting later this week. If this is the case, it seems increasing likely that we will see further tariffs followed by further retaliation which can only lead to more downside for already fragile global markets. At the moment, hope of a deal is buoying markets but investors will be prepared for further volatility as approach the end of the week.
Looking ahead to todays trading sessions and once again it’s thin on the ground in terms of economic data in both the Asian and London sessions. Things may heat up a touch in the New York day with the US Consumer Confidence numbers due as well as a speech from the FOMC’s Richard Clarida, traders will be looking for signs of more dovish sentiment from the Fed that has recently led to a sharp decrease in tightening expectations.