Trader's thoughts - The long and short of it

Sentiment has taken a hit overnight courtesy of some unfavourable trade-war headlines.

Market data Source: Bloomberg

Another trade-war headline downs sentiment: There’s some news floating through the wires that sentiment has taken a hit overnight courtesy of some unfavourable trade-war headlines. It’s been reported that Chinese officials aren’t co-operating with their US counterparts, as it applies to certain sensitive elements of trade-negotiations. The S&P500, which had been developing some intraday momentum prior to the release, has retraced throughout trade, consequent to the news. It’s closed flat for the day, but despite this fall, moves in rates and bond markets suggest the fundamentals currently remain the same. The all-important balance between financial conditions and growth expectations is still there, ultimately supporting the bullishly inclined, as markets now prepare for tomorrow morning’s meeting of the US Federal Reserve.

The unresolvable issues: It’s perhaps an assumption alone, but the (very vague) report leaked to the market about trade negotiations surely pertains to one of the well-understood, seemingly intractable issues embroiling the US and China. Those, at its core, unrelated to economics, but to strategic, and somewhat philosophical differences. These are intellectual property theft, currency manipulation, and Chinese military posturing in the Asian region – especially the South China Sea. These differences are relevant because they boil down to brutal power-politics, and an essential clash of ideologies. This isn’t to suggest a trade-deal, and future bilateral cooperation can’t exist between both parties; but that whatever deal is struck, it’s unlikely to put an end to geopolitical tensions.

A trade-deal is still expected: Overall, the short-term economic stress placed on the US and (especially) China will probably force both countries to arrive at some sort of deal, eventually. Markets will benefit from that – and in a sense, they have already priced that outcome in. Industrial metals are the possibly the best harbinger of this: Dr. Copper, amongst others, still looks poised for upside. Assuming this to be so, the question likely to be asked is something like: “what’s next after a trade deal?”. This is where a degree of doubt creeps into analysts minds. It appears unlikely a satisfactory, elegant agreement will be struck between the US and China on this front. There’s too many zero-sum games; with rudimentary differences in world-view making co-operation complicated.

Power-politics won’t stop with a deal: The desire of one state to take a greater share of a finite amount of power is quite comprehensible to most. The behaviour is primal – an instinct everyone and everything seemingly possesses in some way. It manifests between individuals, just as much as it does between groups and nation states. Market participants generally understand this, and factor this in to their views. What seems to be missed sometimes is how inherently different perceptions of the world, when analysing the outward expression of power-politics, exacerbates conflict between nation-states. As market participants, though justifiably not the greatest priority, an appreciation of this dynamic is required, if nothing else to build an accurate view on how market activity may evolve.

A fundamental difference in philosophy: In the instance of the US-China conflict, some liberal, America ideals disagree with some collectivist, Chinese ideals. In the West, we tend to project our cultural motives onto China, and infer meaning from their behaviour from there. This leads to false conclusions and confusion. The best example of this is the way intellectual property is viewed. Although Communist only in name – State-Capitalist, quasi-Stalinism is probably more accurate – the Chinese assessment of intellectual property, and how intellectual property should be treated, betrays the difference in belief between the US and China. Accusations of intellectual property theft, and the subsequent denials thereof, are met with moral objections, resulting in a situation where necessary presuppositions to start productive negotiations struggle to be established.

China’s bid for supremacy in the information age: How can one privatize an idea? Isn’t a communicable idea itself a common good? Probably too crudely put, this (perceived) issue with American capitalism can be articulated. As an aside, these questions go well beyond the US-China trade negotiations and can be found in the way businesses have struggled to monetize ideas in the age of free, sharable information. As it relates to the trade-war though, notice the conspicuous absence of talk about the China 2025 plan from China’s political-elite. It was founded on the objective of becoming the world’s leading tech-powerhouse in a decade’s time. While still clearly the goal of policymakers, the sensitivity of IP issues has meant that document, in a public sense, has been quietly shelved.

ASX probably needs a trade-resolution: Australia is in an invidious position, as is well known, when it comes to the trade-war. We are stuck balancing the interests of our military and ideological bedfellow on one hand; and the manufacturer of our warm economic safety blanket on the other. Australian market participants keenly wait for a trade-deal and hope for a de-escalation in the strategic tensions. This morning, last night’s trade war noise has reduced the gains implied by the SPI Futures contract to 7 points. We await some substantial develops in trade negotiations and the Chinese economic story before the bulls reclaim control of the market. The ASX has tracked sideways recently after all, only supported by a lucky run higher in iron ore prices, and a fall in interest rate expectations.


Deze informatie is opgesteld door IG Europe GmbH en IG Markets Ltd (beide IG). Evenals de disclaimer hieronder bevat de tekst op deze pagina geen vermelding van onze prijzen, een aanbieding of een verzoek om een transactie in welk financieel instrument dan ook. IG aanvaardt geen verantwoordelijkheid voor het gebruik dat van deze opmerkingen kan worden gemaakt en voor de daaruit voortvloeiende gevolgen. IG geeft geen verklaring of garantie over de nauwkeurigheid of volledigheid van deze informatie. Iedere handeling van een persoon naar aanleiding hiervan is dan ook geheel op eigen risico. Een door IG gepubliceerd onderzoek houdt geen rekening met de specifieke beleggingsdoelstellingen, de financiële situatie en behoeften van een specifiek persoon die deze informatie onder ogen kan krijgen. Het is niet uitgevoerd conform juridische eisen die zodanig zijn opgesteld dat de onafhankelijkheid van onderzoek op het gebied van investeringen wordt bevorderd, en dient daarom als marketingcommunicatie te worden beschouwd. Hoewel wij er niet uitdrukkelijk van weerhouden worden om te handelen op basis van onze aanbevelingen en hiervan te profiteren alvorens ze met onze cliënten te delen, zijn wij hier niet op uit. Bekijk de volledige disclaimer inzake niet-onafhankelijk onderzoek en de driemaandelijkse samenvatting.

Live prijzen op de populairste markten

  • Forex
  • Aandelen
  • Indices
Verkoop
Koop
Bijgewerkt
Verandering
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Verkoop
Koop
Bijgewerkt
Verandering
-
-
-
-
-
-
-
-
-
-
-
-
Verkoop
Koop
Bijgewerkt
Verandering
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Bovenstaande koersen zijn onderhevig aan de Algemene Voorwaarden van onze website. Koersen zijn uitsluitend indicatief. Alle aandelenkoersen lopen ten minste 15 minuten achter.

Mogelijk bent u geïnteresseerd in…

Dankzij onze transparante kostenpagina ziet u gemakkelijk de kosten die met uw trades gemoeid kunnen gaan.

Ontdek waarom zoveel klanten ons kiezen en wat ons de grootste CFD-provider ter wereld maakt.

Blijf op de hoogte van gebeurtenissen die de markten kunnen opschudden dankzij onze aanpasbare economische kalender.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 74% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder. Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren. Opties en warrants zijn complexe financiële instrumenten. Uw vermogen loopt risico. U kunt uw geld snel verliezen. CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.