Bassanese Bites: Peace in our time? – October 14 2019
Hopes and fears regarding a possible US-China trade deal pervaded global markets for much of last week and the tentative agreement struck on Friday was greeted with restrained relief. The S&P 500 bounced 1% on Friday to be up 0.6% over the week. Consistent with the risk-on sentiment, US 10-year bond yields rebounded and gold and the $US eased back.
Of course, the stock rebound was restrained because no piece of paper was actually signed. Rather there was US acceptance of Chinese pledges to buy more agricultural products, not unduly weaken its currency, allow more foreign investment in the financial sector, and better uphold certain intellectual property rights. In exchange, the US agreed to suspend a planned tariff increase due to take effect tomorrow. Trump described this as “phase 1” of a potential multi-phase agreement process. The focus now is on whether an actual written agreement can be developed that could possibly be signed at the November 16 APEC summit in Chile.
