Financial market research and analysis

Markets are a sea of green as the new week kicks off. Trade deal optimism sent Asian markets sharply higher, whilst European and US futures are pointing to a strong start out of the blocks on the opening bell.

After months of trade tensions, the world's two largest economies are reportedly nearing a trade deal which would remove US tariffs on Chinese imports. Chinese and Hong Kong shares have experienced the biggest gains overnight.

The trade story has dominated headlines and market sentiment for months. Rising trade tensions tied in with growing fears over global growth saw investors pull risk off the table and the Dow off its all-time high.  News of a trade deal could quickly ease these concerns and push the markets up to the next level.  There are suggestions that President Trump and China’s President Xi Jinping could meet towards the end of March for a summit to sign the trade deal, although the date is yet to be confirmed.

As we would expect the move towards a US -China trade deal has boosted risk appetite. Riskier assets such as stocks are in demand, whilst flows out of safe havens such as the yen and gold are also on the up.

Oil Bulls Take Control

Oil climbed in early trade on Monday supported by hopes that the US and China were near to ending their trade dispute, which has slowed global growth. The supply side of the equation is also looking significantly tighter already this year. OPEC supply fell to a four-year low amid OPEC production cuts and over delivery by Saudi Arabia on these cuts. Throw into the mix the sanctions on Iran and Venezuela and a declining rig count in the US to a 9-month low. A move for WTI towards $58 suddenly looks reasonable.

China’s National People Congress

In the wake of growing concerns over slowing Chinese economic growth, China’s annual National People Congress will be closely watched for policy clues. Spending cuts are widely expected this year, in addition to a move away from deleveraging. The broad sense is that current economic conditions don’t allow for further deleveraging, which would further pressurise fragile growth. The Government’s willingness to invest in areas such as infrastructure will be also scrutinised, providing a deeper understanding of the severity of headwinds from the ongoing trade tensions.

Pound Higher on Brexit update

The pound was moving higher on Brexit optimism and Trump talking the dollar down. The pound rose 0.3% versus the buck in early trade. Theresa May has received a list of conditions that her Brexit deal must abide to in order for the eurosceptics to vote for it. As fears of no Brexit or delayed Brexit hit the hard-line Brexiteers, we are seeing a softening of stance. Suddenly Theresa May’s deal is not such a bad option for this group, when compared to the prospect of Brexit being pushed back or not happening at all.

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