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China Comments Boost Trade Deal Hopes

Dec 30 2019, 06:19 PM (+06) | Orbex.com

Equities markets are in good health heading into the New Year as the latest reports continue to foster an optimistic outlook for US/China trade negotiations. Speaking just ahead of the Christmas holidays last week, President Trump said that he and Chinese premier Xi would meet in person to sign the “phase one” trade agreement confirmed this month. Legal teams from both sides are currently reviewing the details of the agreement. It is due to be signed imminently.

China Postive Over Health of Talks

Speaking over the weekend, China’s ambassador to the United States, Cui Tiankai helped keep optimism alive. He said that China intends to honor its commitment regarding the trade deal. Speaking during a televised interview Tiankai said:

“As far as we are concerned, we always honor our commitment. We will always implement what we promised. There is no problem about that.”

Tiankai said that officials from both sides had worked together “in real earnest” and displayed “good faith” in achieving a deal. The ambassador added that “if there are any differences, any problems, the two sides should work closely together to solve them.”

Commenting further, Tiankai said:

“I’m confident that since we have spent so much time with such great efforts at reaching this agreement, I think it would certainly serve the interests of both sides if this agreement is implemented.”

Big Issues Remain

While trades have been bolstered by the confirmation of the phase one trade deal which was initially announced in October, some reservations remain. The US and China are due to start talks on the second round of a trade deal. Though as yet, no schedule or timeline has been made public. Furthermore, there are concerns around the issue of China’s handling of the protests in Hong Kong. The US recently backed a bill to support the rights of protestors in Hong Kong, which angered China.

Taiwan Elections Raise Risks

There are now fears over any US intervention around the issue of China’s claim to the self-ruled state of Taiwan. Commenting on this matter, Tiankai said:

“We have to make a very clear distinction. [A] local election in Taiwan is a local election in Taiwan, Province of China. As far as the US is concerned, the US has made commitments to the one-China policy in the three joint communiques between China and the US, and I just hope they will honor their commitment.”

Tiankai went on to say:

“The bottom line [on the Taiwan issue] is the one-China principle. There is only one China in the world. Both Taiwan and the Chinese mainland are part of China. China’s sovereignty and territorial integrity should not be violated.”

Traders Optimistic For Now

Despite the concerns around issues such as Hong Kong and Taiwan, the market remains optimistic. It’s believed that talks will progress onto the second round of a trade deal. With much more important issues still left to be resolved, traders will need to see a firm commitment from both sides in order to keep equities supported. If the market gets a sense of talks stalling, we could see some pullback as the positive impact of the phase one trade deal fades out.

Technical Perspective

spx500

The SPX500 continues to trade firmly to the upside here with price trading 3234.48 last. Last week, the index rallied into fresh, all-time highs, moving further above the prior 3132.56 level, within the recent bullish channel. While above the 3132.56 level, focus is on further upside with the RSI indicator supporting a further move higher.

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