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XTB TRADEBEAT

Stocks bounce as Mnuchin holds off on escalating trade war

Summary:

  • The US and China decide to hold off on escalating trade war until a wider agreement is worked out
  • Iran lures the EU to get the most out of the nuke deal after the US withdrawal from the pact
  • NZ dollar languishes as Q1 retail sales disappoint by a big margin

Trade negotiators from the US and China decided over the weekend to put a trade war on hold at least until a wider agreement was hammered out buoying stocks in Asia. Both sides agreed they will continue talking about measures under which China is to import much more from the US in order to lower a massive trade surplus it holds. Although there were some leaks that China may trim its surplus by $200 billion, specific numbers were not discussed according to the countries’ joint statement revealed on Saturday. Finally, let’s precise that according to the White House China will "significantly increase purchases" of US goods (probably mainly agriculture and energy products). Having tariff threats postponed stock investors in Asia have increased their holdings pushing major indices higher. A while before the close we have got the Hang Seng being the best performer adding a bit more than 0.7% with the Shanghai Composite (CHNComp on xStation) holding onto its decent 0.6%+ gains as well. Looking at the US futures one may notice that the SP500 fut. is up 0.6% at the time of writing mirroring improved investors’ sentiment.

link do file download linkThe NASDAQ (US100) managed to stay above its short-term support nearby 6860 points and therefore one may expect the index could take a stab at breaking a round 7000 points handle sooner or later. Source: xStatio5

The second topic being worth looking at is Iran and its opinion that the EU was not doing enough to preserve its oil trade with Iran after the US withdrawal from the accord. Notice that Iranian foreign minister put forward to the EU to consider making direct euro-denominated payments for Iranian oil to the Iranian central bank circumventing the US financial system. It’s worth remembering that the US is likely to impose new trade restrictions on Iran when the 90- and 180-day wind-down periods expire. Notice that the EU leaders have already conceded that keeping Iranian oil trade and investment flowing will not be easy, but they have pledged to try to do so either way. The EU poured more than 20 billion EUR into Iranian-based investments since the lifting of sanctions in 2016 (mainly from Germany, France and Italy) and therefore the block could be the most exposed to impending US trade restrictions. One may conclude that so far so good for oil traders as prices continue climbing in the morning (both grades are up 0.8%).

link do file download linkMeantime, Brent prices bounced back from a lower bound of a channel as keeping oil trade between the EU and Iran could turn out hard to realize or even undoable. Source: xStation5

Last but not leas, NZ retail sales took investors by surprise as the first quarter reading missed already low expectations by a large margin. Sales during the first three months of the year ticked up 0.1% in a quarterly basis falling short of the median estimate at 1%, and making a massive dip from 1.4% seen in the fourth quarter (revised down from 1.7%). It’s worth stressing that it was the slowest pace of growth in five years, and it flags up some economic headwinds in sight. It could have led to yet more dormant GDP growth at the same period as consumers’ outlays could have taken a hit. There is nothing surprising that the NZ dollar is trading among the weakest currencies in the morning as the greenback is trying to flex its muscles. Let us remind you of our in-depth analysis with respect to AUDNZD being available under this link.

link do file download linkThe kiwi keeps sliding a sixth week in a row albeit a turning point could be quite close as sellers might run out of ammunition before long causing a corrective rebound. Source: xStation5

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