President Trump has tweeted that “substantial progress” has been made in the talks between the US and China over their trading relationship. This means that Trump will delay the imposition of the additional tariffs that were supposed to be coming into force on 1st March. This is positive for market sentiment, at least in the near term. Whilst the talks are ongoing and the two Presidents Trump and Xi are likely to meet to finalise the agreement (at Trump’s golf resort in Mar-a Lago, Florida), there is still work that needs to be done. Progress made on intellectual property and technology is key, although it is not certain how existing tariffs will be impacted at this stage, nor how long the extension of the deadline will be. For now though, broader risk appetite is positive. Chinese assets are performing very well, with the yuan strengthening to levels not seen since July 2018, whilst Chinese equities are storming higher today. Furthermore, higher risk currencies are performing better today, with the Aussie dollar finding recovery traction as a broadly dollar negative vibe sweeps through major forex pairs. The dollar gained ground on its safe haven status through the trade dispute, but this could begin to unwind now.
Wall Street closed with decent gains on Friday with the S&P 500 +0.6% at 2792, whilst US futures are another +0.3% early today. Asian markets have been strong, especially in China, with the Shanghai Composite +5.4% whilst the Nikkei was +0.5%. In Europe, early moves also look decent with the FTSE futures +0.2% and the DAX futures +0.4%, seemingly set to outperform. In forex, there is a mild early move against the dollar, with the Aussie and Kiwi the strong performers around +0.3% higher. In commodities, the dollar negative vibe is helping gold to maintain support, whilst oil is just stuttering initially today.
It is a very quiet day for the economic calendar today, with Bank of England Governor Mark Carney being the main event at 1000GM
Chart of the Day – FTSE 100
The rally on FTSE 100 has been strong until the past few sessions. With markets such as the DAX and CAC still pulling out for further new multi month gains, it was interesting to see the FTSE 100 stall. Perhaps the negative correlation with the stronger sterling has not helped, but the technicals on the FTSE are beginning to look a little precarious near term. A bear cross on the MACD lines is threatening just as the Stochastics are crossing back lower below 80. The market will be keeping an eye on the RSI which is still positively configured in the high 50s, but if this now goes below 50, along with a MACD cross and bear traction in Stochastics it could begin to pressure the index. For now, the slip back will just be seen as another chance to buy. Candlesticks have been mixed in recent days bit the selling pressure has not taken off yet. On gauge will be taken with a move back into the 7200/7300 pivot band which will improve the outlook again. A move above 7260 would open the upside once more. The key low to watch is the higher low at 7065.