China Global Times Editor said China is prepared for a prolonged trade war, but believe the sides can reach a deal
US Senate unanimously approved the Hong Kong Human Rights bill and sent it to House Representative
Another choppy session today ahead of the FOMC Minutes tonight at 7 pm (GMT) and ECB Minutes tomorrow at 1.30 pm. Markets have remained relatively range bound despite overnight more hawkish headline form Chinese sources suggesting that China is prepared for a long-term trade war with the US. Although we traded in risk-off mode for most of the European session, Equities paired back some losses trading flat at the EU close. Choppy day also in the FX space with USD index flat for the day and EURUSD contained by yesterday low to the downside. GBPUSD remains above the 1.2900 after last night's televised debate between Corbyn and Johnson (absolutely meaningless from a market perspective despite rumours). Looking at equities, it is remarkable to see this resilience in North American Indices despite lack of clear progress on the US and China trade front. Markets are still pricing in a Phase One deal papered and signed by the end of the year. However, investors will have to ask themselves how much risk they can afford to have in equities with the prospect of a prolonged trade war and uncertainties around a Phase 2/3 deal.
Here some big questions for equity investors:
-Has the market already discounted the prospect of a prolonged trade war?
-If not how does the market position for that?-Is there enough liquidity to prevent the worse ahead?
-Is the FED the only reasons for investors risk appetite?
-If yes how long can this last?
If you missed the morning briefing from the desk click HERE