Tags: china | trade | deal | investor | risk

China Trade Deal Hopes Lift Investors' Risk Appetite

China Trade Deal Hopes Lift Investors' Risk Appetite

By    |   Tuesday, 12 February 2019 10:21 AM

President Trump held on Monday evening his first 2020 campaign rally of the year in El Paso, Texas, which is located on the Mexican border where he made among a lot of other things some positive comments on the US-China trade issue, lifting risk sentiment in financial markets across the board.

Trump said that “We are going to make great deals on trade,” and added “We don't want China to have a hard time”. On North Korea, he noted: “Hopefully’ will do as well on second Kim meet as first.”

It’s a fact that President Trump has hereby signaled that equities may not be subject to a further burden of taxation (tariffs) by suggesting that great trade deals are just around the corner. His statements, combined with pro-China comments by White House Chief Economic Advisor Larry Kudlow last week on Fox news, the perception that trade tensions and thus taxes on equities may be reduced seems to take hold as, by the way, U.S. futures show for the moment.

In the meantime, Treasury Secretary Mnuchin and U.S. trade representative Robert Lighthizer have arrived in Beijing yesterday for three days of talks. The two will also meet with China’s Vice-Premier Liu He, who is Beijing’s chief trade negotiator, the South China Morning Post reports.

More positive news on trade would be more positive for financial markets and markets in Asian trading as well as European trading are in a wide spread rally mode.

Yes, ‘risk on’ may be ‘back on’. We’ll see.

Lawmakers Agree in Principle on the 7 Spending Bills

The Wall Street Journal reports that lawmakers on the House and Senate Appropriations Committees have announced that they had agreed to a framework for all seven spending bills whose funding expires at 12:01 a.m. Saturday and that the deal would include $1.38 billion for 55 miles of modern physical barriers along the border with Mexico, according to congressional aides from both parties.

Senator Richard Shelby who is Chair of the Senate Appropriations Committee said: “We reached an agreement in principle between us on Homeland Security and the other six bills. Our staffs are going to be working feverishly to put all of the particulars together.”

In clear language all that means that a second U.S. government shutdown is now extremely highly improbable, which is very good news for all those people who work for the government and of course for the financial markets.

Most international investors still marvel that such a thing needs to be agreed on, but signs of greater willingness to keep things functioning reduce some of the risks around partisan debates later this year, notably the debt ceiling in the second quarter and the budget in September. Both of those events would have the power to do more meaningful damage to markets if partisan disagreements were inflamed.

Brexit Saga Continues

In the United Kingdom, Prime Minister May will be addressing the House of Commons on the interminably tedious topic of getting out of the European Union. The intent is to update Parliament on progress in talks with the European Union. This should be a very, very brief statement.

However, the interest for financial markets is what signals the Prime Minister gives about allowing a further substantive vote in Parliament before February 27. That would raise the possibility that Parliament rather than the UK government ‘delays’ the exit date from the European Union to allow negotiations to continue further.

The end of February is rather critical for the parliamentary vote as it would take some time for Parliament to actually put the necessary legislation into law and so the end of February is viewed as a ‘cutoff date’ for this possibility, Channel News Asia reports.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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More positive news on trade would be more positive for financial markets and markets in Asian trading as well as European trading are in a wide spread rally mode.
china, trade, deal, investor, risk
Tuesday, 12 February 2019 10:21 AM
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