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Market glee after speech by Xi

Big gains on Wall Street were mostly erased by the close of the session on Monday as nerves crept in during the volatile last hour of trading. Traders were caught off guard by reports that President Trump’s personal lawyer was raided by the FBI. The raid was in connection with payments to adult film star Stormy Daniels and conducted by the Justice Department aided by a referral from the Mueller investigation. The escalation that people are watching out for is that Trump responds by firing Robert Mueller. Political fireworks at home would put extra pressure on delicate trade negotiations.

 

The prospect of a more open Chinese economy has fuelled gains overnight in Asia and is setting up Europe for a very strong open on Tuesday. Chinese President Xi Jinping unveiled a new set of economic reforms, including Trump-friendly plans to reduce tariffs in a speech at the Boao Froum. Xi’s apparent desire to balance out his country’s international payments is clearly great news for countries and companies selling goods to China. While China may still be teeing up its reciprocal response to the $100bn in Tariffs from the US, Xi has shown good intentions via his speech. We are still clinging on with gritted teeth to our belief that a trade war will be averted.

 

With China the biggest export market for Australia, the Aussie dollar broke to near a two-week high after the speech. After a rocky few days thanks to trade war concerns, talk of a more open China could support base metals and basic resource shares. 

 

Later on, Facebook chief executive Mark Zuckerberg will testify before Congress on the Cambridge Analytica data scandal. Zuckerberg will be in for a grilling and the way he responds could dictate future regulations on the use of personal data that his business so heavily relies upon.

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