Summary:
- Trump says Huawei may become part of a trade deal
- Eurosceptics suffer unexpected defeat in the Netherlands
- AUD moves lower as forecasters point to 3 rate cuts this year
The Asian trading hours on Friday did not brought a reversal to trend we are observing on equity markets this week. Shares in Australia and Japan declined just as majority of indices from China. However, HSCEI (CHNComp) is trading higher against yesterday’s close as one of the few one the continent.
A steep downward move brough HSCEI (CHNComp) back to the support zone ranging 10350-10450 pts. Note that this hurdle served as the lower limit of the consolidation range for the second half of 2018 and was respected by price quite a few times. A break lower could pave the way towards the psychological 10000 pts handle. Source: xStation5
US-China trade deal to include Huawei?
The recent shift in the US approach to the trade war is worrying. While Donald Trump targeted Chinese good flowing to the US earlier, he now barred some US supplies from being shipped to China as a part of crackdown of Huawei Technologies. While the topic of Huawei was not directly related to the trade (the move was reasoned with national security concerns), it now may have become a part of trade war. During yesterday’s briefing at the White House, Donald Trump told reporters that lifting sanctions against Huawei could be a part of a trade deal. These remarks can be seen as an attempt to incentivize China to offer some concessions in trade talks. However, given how many times we were told that “the deal is near”, words may be not enough to soothe bleeding markets this time. Apart from that, it may be worth mentioning other reports on the topic that has surfaced over the night. Namely, Bloomberg agency reported that a few US officials told it that the decision to target Huawei was made shortly after the latest round of trade talks broke down. An outright attack on a company that is sometimes called “the crown jewel of China” may highlight how Trump is irritated with the ongoing situation and that, in fact, he came to realize that trade wars may not be so easy to win. Meanwhile, rumours surfaced on the markets saying that China will issue a policy aimed at boosting the development of small tech companies - some kind of confirmation of the latest pledges from Chinese officials that the country will start to develop new technologies rather than import.
EURUSD managed to recoup all of the losses yesterday as disappointing PMI indices from the US caused investors to drop USD holdings. The main currency pair climbed to the 1.1185 handle, a level marked by local lows from March and April. EUR traders should stay on guard at the beginning of the next week as results of the European elections may cause the currency to be more volatile. In case an upward move is initiated, the downward sloping trendline should be kept in mind. Source: xStation5
Dutch deal blow to eurosceptics
Yesterday was the first day of the European Parliament elections. Citizens of the Netherlands and the United Kingdom were among the first to go to polling stations. While no exit polls from the UK are available as the national law does not allow it, results from the Netherlands turned out to be a surprise. According to the exit polls, the Dutch Labour Party led by the EU Commissioner Frans Timmermans secured a victory. This is a surprise as it was the Eurosceptic Forum for Democracy that was expected to win while the Labour Party was forecasted to come in at third position. Exit polls hint at completely opposite result. Liberal party of the Prime Minister Mark Rutte secured second result as expected. While this is certainly a reason to cheer for Social Democrats, it may be semi-important given how small is representation of the Netherlands in the European Parliament. The country is entitled to just 25 out of 751 seats. The 18% result herald by the exit polls would give 5 seats to the party of Frans Timmermans. Czech and Irish citizens will go to poll stations on Friday with remaining countries voting over the weekend.
In other news:
- Australian dollar is the weakest G10 currency on Friday morning after high-profile interest forecaster said that he expects RBA to lower rates three times this year
- Japanese CPI sat at 0.9% YoY in April while CPI excluding food and energy accelerated to 0.6% YoY. Both results were in line with expectations
- New Zealand’s trade data for April showed smaller than expected surplus (433 million) due to major increase in imports
- Theresa May may announce timetable for resignation today
