Trade optimism returns as China agrees to increase penalties on IP theft

• China to increase penalties on IP theft

• Stocks and risky assets start the week higher as trade optimism dominates

• AUDJPY holds above the trendline, 74.25 resistance ahead

Stock markets in Asia moved higher along with other risky assets while US and EU futures pointed to a green opening. Optimism can be ascribed to announcement that China will increase penalties on Intellectual Property theft in order to address one of the sticking points in Sino-US trade negotiations. The Asian country will also look into lowering threshold for criminal punishment in IP theft cases. The move is likely to bring two countries a little bit closer to signing Phase One trade deal. However, one should remember that a lot of other issues remain, including Chinese agricultural purchases and opening of the Chinese economy to foreign firms. It looks like China could consider such measures in return for a promise of rolling back some or all of the tariffs. However, it may not be so easy given conflicting stance of US and Chinese leaders. Namely, President Xi said last week that trade deal must be based on “equality” but just a few hours later, Donald Trump said that deal cannot be equal as the United States were treated unfairly for so long and the deal should favour US interests. Nevertheless, some kind of a partial deal is likely to be signed sooner or later as Trump needs a proof ahead of the 2020 elections that his trade policies are working.

AUDJPY - FX pair considered to be driven primarily by market sentiment - gains today. The pair attempts to distance away from the 50-session moving average (green line) and upward trendline. However, longer recovery could be put under question as resistance at 74.25 handle looms large. Source: xStation5