Most Asian stocks and currencies are advancing, despite the S&P 500 having slipped further from its record high, as investors are fed a string of conflicting signals on the US-China trade deal. Media reports suggest a fresh round of trade talks in Beijing is on the cards, as well as a possible postponement of tariffs slated for December. However, US President Donald Trump’s potential support for the Hong Kong protests may complicate the path towards reconciliation between the world’s two largest economies. Gold declined by 0.5 percent to hover around $1464 at the time of writing, while US 10-year Treasury yields have climbed over two percent since Wednesday.
Investors are mindful of the trade deal’s importance in supporting hopes of a global economic recovery next year, even as they take into account the OECD’s lowered forecasts which point to a lackluster 2.9 percent global GDP for this year and 2020. A further escalation in trade tensions would only undermine the world economy’s growth momentum while amplifying chatter about a global recession, which would weigh negatively on emerging-market assets and bolster demand for safe havens such as Gold and US Treasuries.
EURUSD holds above 1.10 ahead of PMIs
The Euro has remained within a tight range against the US Dollar this week, as investors now look ahead to the PMI data releases out of EU member countries. With Germany having just avoided a technical recession in Q3, investors would be looking for signs whether the worst is over for its manufacturing sector, which last month remained firmly in contraction territory. However, any sign that the manufacturing slump may have bottomed out could translate into limited gains for EURUSD, although more upside might only be crystalised upon greater certainty surrounding the US-China trade deal.
Brent cools after surging to 2-month high
Brent futures breached the $64/bbl mark for the first time since the mid-September attacks on Saudi Arabia’s oil assets, before moderating slightly. Brent is set to register three consecutive weeks of gains, due to the relatively staunch optimism that a US-China trade deal remains a likely scenario.
As long as the US and China keep engaging positively with one another, Oil is likely to hang on to most of its recent gains. However, the risk of another flare-up in US-China tensions cannot be fully ruled out at this juncture, which leaves Oil prices vulnerable to developments surrounding the trade-talks.