Wall St. to open lower; Mnuchin upbeat on trade deal

Summary:

• US indices in the red on Chinese reluctance to sign trade deal

• Tsy Sec: Mnuchin says “progress made last week”   

• US celebrate Columbus day

After an eventful end to last week it’s been a busy start to the new one for US stocks, with trade headlines remaining the main driving force on the markets. This comes as China has reportedly stated their desire for more talks ahead of signing the “initial deal” that was announced late on Friday. The deal itself was fairly underwhelming when announced late on Friday with an increase in agricultural purchases and the avoidance of a marginal increase in the rate of levies seen as the bare minimum expected from the markets. The failure to even get this agreed upon is worrying and seeing as this is “phase one” of Trump’s self proclaimed big deal, there is now serious doubts as to whether phases two and three will ever even get off the ground. 

There’s been some selling seen in the US500 this morning but price remain above the 38.-41.4% fib region which runs from 2947-2951 which could be seen as possible support. Source: xStation 

This afternoon Steve Mnuchin has given an interview on CNBC with the US Treasury Secretary offering a more upbeat take on the recent events. The following are selected comments:

• China will step up agricultural purchases

• If US-China trade deal is not in place by December 15th then tariffs will be imposed - but expects a deal

• There is a fundamental agreement in principle   

• Still some issues that need to be worked out but we have every expectation that phase 1 will close   

• Deputy level call this week. Lighthizer and Mnuchin to call vice premier next week

On balance the tone is clearly positive here, with the last two lines above the brightest. It seems that this story is going to carry on for the time being and should remain on traders’ radars along with earnings season as the key factors to watch for the week. 

The forthcoming session may be a little light on volumes as its a bank holiday in the US to celebrate Columbus day, but with the stock exchanges still open there shouldn’t be too subdued levels of activity.

The US500 remains within a larger range although it is worth pointing out that the market is seemingly more sensitive to positive comments than to negative events on the trade front. This could be seen to say something about its current reaction function and what investors are focusing on at present. 2994 a level to watch above. Source: xStation