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Good news for Soybeans?
White House statement: “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States. China has agreed to start purchasing agricultural products from our farmers immediately.”
Let the Xi-Trump post-dinner debate begin
The markets were preparing for a day of binary trade unwind re-engage chaos as a trade war, geopolitical powder keg, and even oil markets hedges could have been forced to unravel.
But with so many rooted risks in play with no clear-cut viable contingencies, play booking an outcome was near impossible. Nonetheless, it will be interesting to see how the broader markets interpret these latest trade events after trudging through an extended period of arduous de-risking/ re-risking that was driving trading desks batty. But the question remains, was there enough meat in this the dinner bone to go full bore ” risk on” into the holiday season.?
With the immense weight of the global supply chain dynamic worldwide network on their shoulder, a tariff detente has emerged after a highly anticipated dinner. Both Presidents’ XI and Trump have reportedly( The China Daily and Chinese international broadcaster CGTN ) agreed to put on hold the menacing tariff increases expected to get imposed January 1, marking a significant de-escalation in trade tensions between the world’s two biggest economies. Thankfully, for risk sentiment, the dinner date ended with a sense of harmony rather than trade war discord.
Any easing of tensions on trade will reverse some USD haven hedges, and we should expect the dollar to soften more so against high beta currencies along with providing a fillip to riskier assets including Asian emerging-market currencies and stocks. But the reality is, given the great ideological divide between the bastion of free markets capitalism and the champion of state-driven capitalism is still an immense work in progress but the weekend developments have increased three folds the scope for a broader de-escalation in trade matters. All in all, a slightly better outcome than expected in my view
On the oil front, Russia and Saudi Arabia agreed to extend into 2019 their agreement to manage the oil market, known as OPEC+, although Moscow and Riyadh have yet to decide on any fresh output cuts. While nothing concrete has emerged, this does clear one significant barrier on the road to a possible OPEC + production cut. However, the most significant obstacle of them all, President Trump lies in waiting.