Summary:
- Confusing trade war headlines rattled equity markets
- FOMC minutes showed most officials saw still significant risks to the economic outlook
- Equities trade lower, still room to head lower once trade deal hopes fade away
Asian equity markets dropped on Thursday in response to a bunch of confusing headlines regarding the US-China trade spat. A report from Reuters released Thursday afternoon was a trigger as it suggested no deal agreement could be made until the end of the year. In turn, a bit earlier Bloomberg reported that trade negotiations are in a sensitive stage and could easily fall apart. Overnight, Donald Trump reiterated once again that China wants a trade deal more than he does, it can be treated as a clear indication that no everything is going smoothly. Moreover, Bloomberg reported on Wednesday that Chinese President Xi’s last foreign visit this year was planned to Brazil, suggesting that any trade deal signing ceremony is unlikely to take place outside China this year unless Liu He is empowered to sign a deal on behalf of Xi Jinping. Last but not least, Chinese Vice Premier Liu He said overnight that he is “cautiously optimistic” about reaching a trade deal with the US.
Although the above-mentioned information clearly pushed stocks lower, one cannot forget about FOMC minutes released yesterday from the October’s meeting. The account suggested that most officials saw elevated and significant risks to the economic outlook, thereby justifying another rate cut then. Moreover, most participants judged policy would be well calibrated after the rate cut last month and “likely would remain so as long as incoming information about the economy did not result in a material reassessment of the economic outlook.” In practice, it means the Fed is done with cuts so far and this notion is shared by a majority of the FOMC.
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US100 drew the sinister pattern at the daily chart on Wednesday. Source: xStation5
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