Trump Rally Extends, Easing Tensions Clear Path To New Highs

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Trump Rally Extends, Easing Tensions Clear Path To New Highs

Asia equities extended a global rally yesterday, with the US decision to no longer designate China a currency manipulator a further sign of easing tensions between the economic titans.
The Treasury announcement came days before the two sides are due to sign off on the first part of a wider trade agreement that has helped fan a rally in world markets.
It also led to a sell-off in safe-haven assets with the yen at a seven-month low and gold down almost 1%, while oil was also struggling with the US-Iran flare-up seemingly in the rear window for investors.
Asia was given a firm lead from Wall Street, where all three main indexes ended higher – with the Nasdaq and S&P 500 hitting fresh records – on reports the US was about to remove the manipulator label from China.
Donald Trump accused Beijing in August of weakening its yuan currency “to steal our business and factories”, re-stating a long-standing grievance.
But soon after the end of trade on Monday, the Treasury said in its semi-annual report to Congress that the unit had strengthened and Beijing was no longer keeping it artificially weak.
The yuan jumped more than 1% at one point yesterday before easing slightly.
The currency is up more than 4% from an 11-year low touched in September.
“The yuan is the purest and best barometer to gauge the market’s view on US-China trade tension,” said AxiTrader’s Stephen Innes. “With the yuan strengthening ahead of the ‘phase one’ deal signing, it’s indicating the potential for further improvement in trade relations.”
The US reversal of China’s status as a manipulator “is a most precise and definitive de-escalation of trade tension to date and provides a less congested road as we pivot to phase two of the broader trade agreement”, he added.
Data yesterday showed China’s trade surplus with the US narrowed 8.5% in 2020, which will likely play well in the White House, where the huge disparity is a key bone of contention in the White House and a major catalyst of the trade war.
Tokyo was among the biggest gainers, rising 0.7% to 24,025.17 as the dollar advanced against the yen owing to a rush out of safety – giving a boost to Japan’s exporters.
Singapore and Seoul each put on 0.4%, Sydney added 0.9%, Wellington climbed 0.7% and Taipei gained 0.6%.
Mumbai and Bangkok edged up 0.1%, while Jakarta rose 0.2%.
However, profit-taking saw Hong Kong drop 0.2% to 28,885.14 and Shanghai slip 0.3% to 3,106.82 following recent advances, while Manila fell 0.7%.
Improving confidence also hit gold, which is a popular go-to asset in times of turmoil.
The yellow metal last week broke $1,600 for the first time in seven years on the Iran crisis but the lowering of expectations for a conflict with the US has seen it tumble more than four % from its recent high.
The improving China-US outlook saw it drop 0.9% yesterday.
As well as Wednesday’s signing, investors are also looking forward to corporate earnings season, which kicks off in earnest this week with the release of reports from top banks including Citibank, Goldman Sachs and JP Morgan.
“Our expectation is a solid earnings season – nothing extraordinary but nothing really terrible,” Kristina Hooper, chief global market strategist at Invesco told Bloomberg TV.
“The environment is so accommodative that it really is supportive of risk assets, including equities, even if we have a lacklustre earnings season.”

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Equities Rally, Oil Steadies As US-Iran Tensions Appear To Ease

Mohammad Ali (@ChaudhryMAli88) 3 months ago Thu 09th January 2020 | 05:29 PM

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Stocks rallied, the dollar jumped and oil prices steadied Thursday as traders saw an easing of tensions between the United States and Iran that weighed on haven investments such as gold and the yen

London (UrduPoint / Pakistan Point News – 9th Jan, 2020 ):Stocks rallied, the dollar jumped and oil prices steadied Thursday as traders saw an easing of tensions between the United States and Iran that weighed on haven investments such as gold and the yen.

“Stock markets are strong. as US-Iran tensions have faded,” noted David Madden, analyst at CMC Markets UK.

“The strong finish in New York last night prompted buying in Asia overnight, so now the bullish sentiment has reached Europe.

“The US and Iran are still at odds with each other, but as long as a conflict doesn’t seem to be on the horizon, the feel good factor is likely to last,” Madden added.

US President Donald Trump on Wednesday pulled back from the brink of war with Iran, saying Tehran appeared to be “standing down” after firing missiles — without causing casualties — at US troops based in Iraq.

The comments cooled what threatened to become an uncontrolled boiling over of tensions after Trump ordered the killing last Friday of a top Iranian general, Qasem Soleimani.

Oil prices, which spiked briefly to four-month highs on Wednesday soon after the Iranian attack, dropped back below their start point on the softer tone from both sides.

They managed to avoid further losses Thursday, trading virtually unchanged compared with prices late in New York on Wednesday.

On Wall Street, the Nasdaq hit another record high Wednesday while the Dow and S&P 500 indices enjoyed big gains.

And the positive mood continued into Asia. Tokyo and Hong Kong rallied around two percent and Shanghai ended with a gain of 0.9 percent.

Frankfurt took the lead in Europe, jumping 1.3 percent in midday deals.

The rush to riskier investments saw gold, seen as a haven in times of unrest, sink more than one percent, having broken $1,600 per ounce for the first time in seven years.

“Assuming Iran-US tensions continue to simmer rather than boil, markets are likely to refocus on the global growth outlook and on trade, with the interim US-China trade deal expected to be signed on 15 January,” said National Australia Bank’s Tapas Strickland.

The lowering of tensions will allow traders to turn their attention to the release Friday of US jobs data, which will provide the latest snapshot of the world’s number one economy, with recent figures indicating it remains robust.

Also in focus is the upcoming earnings season, which kicks off this month.

In London meanwhile, the pound slid around half-a-percent versus the dollar and euro after Bank of England governor Mark Carney said Britain’s economic recovery was “not assured” despite a drop in Brexit uncertainties.

Spiraling Trade Tensions Threaten Economy as Trump Pressures China

WASHINGTON — Global trade tensions escalated this week as the United States renewed its tariff war with China, sending major stock indexes tumbling as fears of an economic slowdown rattled investors around the world.

The S&P 500 index had its worst week of trading this year, as shares on exchanges from Tokyo to London fell on Friday — one day after President Trump announced new tariffs on another $300 billion worth of Chinese imports following stalled negotiations. Beijing’s response was swift.

“China’s position is very clear that if U.S. wishes to talk, then we will talk,” Zhang Jun, China’s new ambassador to the United Nations, said Friday. “If they want to fight, then we will fight.”

As the two sides appeared to drift further from a deal, Japan and South Korea veered toward their own trade confrontation on Friday, injecting greater uncertainty into the region.

The disputes could exacerbate fears of a global economic slowdown and threaten to crimp the United States’ economic expansion, its longest on record. The European Central Bank is preparing to try to bolster the eurozone economy to help weather the slowdown in growth, while China has experienced its slowest economic growth in 27 years. On Wednesday, the Federal Reserve cut interest rates for the first time in over a decade to get ahead of possible downturns.

New hiring data released Friday showed the United States economy continued to chug along, with employers adding 164,000 jobs in July. But there were signs of cooling in the job market, complicating matters as the trade war begins to reshape the economy in ways that could run counter to Mr. Trump’s goals of strengthening it.

The Commerce Department announced Friday that the trade deficit with China fell in the first six months of the year compared with a year earlier, and the country fell from being the United States’ largest trading partner to being its third, after Mexico and Canada. However, the overall trade deficit increased. American exports of goods and services to the rest of the world were flat from the year before, while imports from the rest of the world grew.

In a campaign rally in Cincinnati on Thursday, the president was unbowed with his strategy.

“Until such time as there is a deal, we will be taxing the hell out of China,” Mr. Trump told a cheering crowd.

Chinese officials and the state-run media have grown increasingly strident in response to Mr. Trump’s tactics.

“We definitely will take whatever necessary countermeasures to protect our fundamental right, and we also urge the United States to come back to the right track in finding the right solution through the right way” said Mr. Zhang, China’s U.N. ambassador.

After a series of missteps and misunderstandings, the United States and China appear to be nowhere close to a trade agreement at a time when trade barriers remain in place with other American partners. Mr. Trump’s rewrite of the North American Free Trade Agreement is still stalled in Congress, awaiting the support of Democrats. His threat of auto tariffs has not yet persuaded Japan or Europe to sign a trade deals with the United States, as he intended. And the European Union, India, China, Turkey and others have responded to Mr. Trump’s aggressive trade tactics by putting their own retaliatory tariffs on American products.

If the president’s newly threatened tariffs go into effect, the United States will have imposed levies on all of the goods it imports from China, which totaled $539.7 billion last year.

Mr. Trump said that the new tariffs would go into effect on Sept. 1, leaving a window for the United States and China to try to work out their differences. But that appears to be a difficult task. Negotiators from the two countries continue to disagree over how the agreement would be enshrined in China’s laws, how many of Mr. Trump’s tariffs on China would be removed, and how many American goods China would purchase.

The president and his advisers insist the strategy is necessary to take on China’s long record of unfair trade practices, but the tariffs are taking a toll.

The tech-heavy Nasdaq composite index fell 1.3 percent on Friday, and the Dow Jones industrial average dipped 0.4 percent. The yield on the 10-year Treasury note fell to 1.85 percent, its lowest level since 2020, in a sign of economic pessimism.

Myron Brilliant, executive vice president and head of international affairs at the U.S. Chamber of Commerce, said that the president’s additional tariffs “will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong U.S. economy.”

“We are deeply disappointed that the two sides missed the opportunity in May to address the substantive disagreements between them and have not yet reached a comprehensive, enforceable agreement,” Mr. Brilliant said.

China has vowed to retaliate against American actions, but it remains unclear how exactly it would respond. Because many more goods flow from China to the United States than the other direction, China has not been willing or able to match Mr. Trump’s tariffs dollar for dollar.

But company executives say the Chinese government has used other painful methods to retaliate against them — surprise inspections, rejections for licenses and China’s move to construct a list of “unreliable entities” that Beijing has threatened to take action against. Beijing could also encourage a boycott of American goods or direct its state-owned companies to stop purchasing, for example, American soybeans or Boeing airplanes.

The United States-China trade dispute is not the only conflict that threatens global growth.

On Friday, Japan increased its controls over a broad swath of exports to South Korea, deepening a political standoff that has plunged relations to their lowest point in decades.

Japan said it would remove South Korea from a “white list” of countries that receive preferential treatment in importing Japanese products, a move that could slow supply chains in the technology industry.

South Korea’s president, Moon Jae-in, threatened retaliation. “If Japan intentionally hurts our economy, it will also have to suffer big damage,” Mr. Moon said.

With the specter of the China conflict as a backdrop, Mr. Trump on Friday promoted his trade record in an event in the White House’s Roosevelt Room, where he announced that his administration had secured access for American cattle ranchers to the European market.

The agreement could triple the amount of beef that the United States can export duty-free to the European Union over the next seven years, to a value of $420 million, the United States trade representative said in a statement. The agreement was reached in June, and still requires ratification by the European Union’s member countries.

During the event, Mr. Trump paused to compliment the hats of the assembled cattle ranchers before lauding the new agreement as a “tremendous victory” for American farmers and European consumers.

“My administration is standing up for our farmers and ranchers like never before,” the president said. “We’re protecting our farmers. We’re doing it in many ways, including with China. You may have read a little bit about China lately.”

The announcement is welcome news for American beef producers who have found themselves pushed out of markets as Japan, Australia, Canada, the European Union and other countries have written new trade deals among themselves in recent years. But the limited agreement is unlikely to do much to distract from the uncertainty and volatility that Mr. Trump has stoked by pushing American trading relationships to their limits.

Mr. Trump suggested Friday that he would continue to pursue the type of trade policy that resulted in the agreement with the E.U. — one, he argued, that came about because of his tough trade posture, not in spite of it.

“Look, the E.U. has tremendous barriers to us, but we just broke the first barrier,” Mr. Trump said. “And maybe we broke it because of the fact that if I don’t get what we want, I’ll put auto tariffs. Because it’s all about the automobile, and it’s all about the tariffs.”

“If I don’t get what I want, I’ll have no choice but maybe to do that,” he added.

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