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Sino US progress boosts markets

March 1, 2019 8:15 AM
The almost year-long tug of war between the US and China may be finally reaching some form of resolution. After the most recent set of negotiations, the negotiators from both sides have kept the details of the outcome close to their collective chests, but they are now reportedly preparing a final document which could be ready to be signed by the presidents of the two countries when they next meet in mid- March. 

The stock markets’ first reaction was a rally which is likely to be replicated over the coming days, particularly when the two sides then decide to remove the tariffs that are already in place now. The FTSE is trading up 0.63% this morning and the DAX, which has always suffered more from the Sino-US tensions because of the heavy exposure of its car industry to Asia trade, is 1.1% higher.

MSCI multiplies China’s share in global index

In a boost to Chinese stock markets major global index provider MSCI decided to quadruple the weighting of domestic Chinese shares in its emerging market index. The move is a nod to the process of opening of China’s home markets to foreign investors. Until now investing in an Asia or emerging market index would have mostly involved buying Chinese stocks listed in Hong Kong or on foreign exchanges, but the redefined MSCI index will be tied to China’s domestic shares, thus directing international capital into mainland China’s stock market.

Forex the day after Corbyn’s Brexit U-turn

Having been buffeted by Brexit news flow all of this week the currency market seems a bit more sedate Friday. The pound is a notch weaker against the euro and against the dollar this morning but is trading comfortably above the $1.320 level indicating that the market is discounting a no-deal Brexit as a likely outcome. The finer points of the current Brexit proposal are still being negotiated in Brussels but now that Theresa May has agreed that MPs will be allowed to vote on delaying Brexit and Jeremy Corbyn has said he would back a second referendum, there is little to do other than wait and see how it all plays out.

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