A bit of hope. Superficially positive. Still a work in progress.
The reactions of investors and analysts to the outcome of Donald Trump and Xi Jinping’s trade-focused dinner Saturday suggest markets are unlikely to embark on a lung-bursting risk rally. The avoidance of any escalation in the dispute, however, may bring relief to some assets.
Stephen Innes, head of Asia Pacific trading at Oanda Corp:
- 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 dinner bone to go full-bore “risk on” into the holiday season?
Olivier d’Assier, head of applied research for APAC at Axioma Inc
- Risk assets like equities will have a good week, but the big re-balancing into bonds ahead of the next down cycle in the economy will continue. With two more Fed rate hikes (at least) on the cards, yield curve inversion is still in play for early next year. The halt to trade hostilities and no more tariffs for a while is probably good enough for a relief rally in both the U.S. and China’s markets, but not enough to change the current outlook for next year and stop the global economy from slowing down.
Jean-Charles Sambor, deputy head, emerging-market debt, BNP Paribas Asset Management:
- While the long-term outcome remains uncertain, and we do think that trade tensions will remain elevated in the foreseeable future, we think that there is still too much negativity priced in, and we should be poised for a rebound in the short term. It is apparent that both sides have a strong incentive to continue the dialogue. So we would disagree with the doomsayers of an imminent short-term collapse of negotiations between the U.S. and China.
Frances Cheung, head of Asia macro strategy at Westpac Banking Corp:
- This is the best outcome that we had hoped for out of this meeting. Although some optimism had been built in the price, Asian currencies may still be able to rally. However, this is better seen as a temporary truce and uncertainty on U.S.-China trade relation remains.