US-China trade tension rises ahead of talks

Dimming optimism over US-China trade as both sides ratchets up the tensions once again sets the market on a risk-off mood while we await the Fed minutes release.

‘Stay tuned’ for Chinese retaliation

The optimism that had spread across Asia markets on Tuesday in anticipation of the US-China trade meeting will be more than erased a day later with the menacing developments between the two parties. After blacklisting eight Chinese tech companies at the start of the week, another 28 Chinese entities appear to have been brought into the picture over their role in the repression of Muslim minorities. The timing given the proximity to the commencement of trade talks on Thursday elevates the matter as a provocative move and certainly does not spell well of the US-China ties on hand. Moreover, this matter is evidently regarded as an internal affair for China, a touchy topic to broach.

China’s foreign ministry spokesperson had notably suggested that retaliation may be in the works with the ‘stay tuned’ comment. While China had been relatively quiet in the past weeks amid suggestions of US limiting investments for the former, any significant signs of retaliation may well dim the outlook on any near to medium term resolution of the trade conflict. Expect this risk-off mood to continue in the near-term for Asia markets.

Wall Street facing pressure

Notably, over and above the heightening US-China trade tensions, US data had similarly contributed to the drag on the riskier equities. September’s producer price index had unexpectedly fallen, touching the lowest in eight months in negative territory at -0.3% month-on-month. This opens up the array of concerns on the demand end and further fuels the expectation for the Fed to make another back-to-back lowering of interest rates. As far as the US market is concerned, however, one can see that the S&P 500 index appears to be threatening the uptrend support, one to watch ahead of the support at around 2872. The 5-day performance for the sectors within the S&P 500 index likewise reflect the risk-off tone with the defensives faring relatively better than the cyclicals, particularly the trade sensitive sectors.

Fed minutes will be due in the session ahead as well among other central bank updates in the session, one to watch for details after Fed chair Jerome Powell reassured the markets of its strength while expressing intent to resume expanding the Fed’s balance sheet.

Source: IG Charts

Source: Refinitiv, IG

Yesterday: S&P 500 -1.56%; DJIA -1.19%; DAX -1.05%; FTSE -0.76%


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 30
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
China 300
-
-
-
-

Prices above are subject to our website terms and agreements. All share prices are delayed by at least 20 minutes. Prices are indicative only.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.