Late last week US and Chinese officials announced a deal. This newfound cooperation bodes well for resolving the escalating trade war between the world’s two biggest economies. If we do succeed in implementing this plan, it will return the free flow of sensitive commerce. These products have been the most negatively affected by tariffs and trade barriers. Even as the specifics of the agreement started to crystallize, keeping some elements murky, reactions among investors were decidedly mixed.
As such, the trade agreement comes at an extremely opportune time. Investors have now turned their attention to next week’s US CPI (consumer price index) report, which is expected to provide a clearer picture of inflation trends and their impact on monetary policy. Analysts say today’s CPI data will set the tone of market moves into Federal Open Market Committee meetings around the world.
At the same time, across the North Sea, UK Chancellor Rachel Reeves will be outlining spending priorities that could re-route fiscal policy in the UK. This action will likely prove historic as it will draw unprecedented attention in financial markets as investors try to parse its meaning for the economy. Meanwhile, all Asian markets are humming with upbeat risk sentiment. Unsurprisingly, investors continue to be buoyed by the positive disposition of recent trade headlines.
Even with all this optimism US, and European equity futures are mildly negative in pre-market trading. Others in the marketplace are perhaps understandably frustrated with the lack of certain specificity in current trade talks. They were looking for clearer written commitments from the administration and the State of Iowa. Fear of the unknown details of the deal have spurred a ‘wait and see’ approach from investors.
The same can be said for US and Chinese relations today. At the same time, important advances are taking place on negotiations between the US and Mexico. Negotiations reports indicate that the two countries are close to a final agreement. This provision in the deal would remove the pesky 50% tariffs on steel imports to the U.S. This possible deal would build on the already strong trade ties in North America, further benefiting our supply chains.