European markets bounded higher and Wall Street jumped out of the blocks on the front foot as investors cheered news that President Donald Trump is to meet with Chinese Vice Premier Liu He later this afternoon.
After the two powers have been locked in a trade war for months, we are finally seeing signs that real progress is being made in negotiations. Trump has indicated that the March 1st trade truce deadline isn’t set in stone and now he is meeting with the second in command; the two sides have come a long way since prior to the G20.
US – Sino trade tensions have dictated market sentiment for months. Fears of trade tariffs impacting on global growth resulted in traders pulling risk off the table. Hopes of a trade deal have seen traders putting that risk back on the table with the US S&P rallying 18% from its December 24th low. If the two powers can manage to push this deal over the line then we could expect to see a sustained move higher in equities across the globe.
The meeting between Trump and Liu He is at 14:30 EST. so European markets will be closed by then. Any positive headlines could dictate a strong finish for US markets into the weekend and a positive start for Asia and Europe next week.
Euro steady below $1.1350 on mixed data
Friday was another big day for data in the eurozone. The euro has slipped below $1.1350 after a mixed bag of releases. The German IFO business climate slightly missed expectations with 98.5, eurozone inflation contracted by -1% month on month in January, slightly less than forecast. Investors will now wait patiently for Draghi’s speech at 15:30. We already know that ECB policy makers are taking a more dovish stance amid growing concerns over the health of the global economy. More dovish comments from the ECB President could see the euro target $1.13.
Brexit uncertainty to pull pound sub $1.30?
The pound extended losses for a third consecutive session on Friday as Brexit fears rattled investors. A renegotiation of the Brexit deal never really took off and officials on both sides are downplaying the chances of a breakthrough. Should Theresa Mat return to Parliament empty handed next week, there is a good chance that she will be forced to extend Article 50 and hand over the reins of the Brexit process to Parliament. Given the heightened levels of uncertainty the outlook for the pound remains negative. Sterling could quickly find itself below $1.30 once again.
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