Risk continues to hold steady on the day


Markets remain optimistic about trade talks in Beijing this week


  • S&P 500 futures +0.5%
  • Eurostoxx +0.8%
  • Germany DAX +1.0%
  • Oil up 0.8% to $52.82
  • US 10-year yields up 2.7 bps to 2.681%
  • USD/JPY trades up at 110.56

Investors continue to be hopeful that trade talks between US and China this week will take a more positive turn in the coming days and that’s being reflected in price action seen in equities and particularly USD/JPY to start the new week.

The latest update on trade talks is that Lighthizer has already touched down in Beijing ahead of his meeting with China vice premier Liu He on Thursday.

I reckon investors are not wrong to expect a positive outcome upon conclusion of talks this week but don’t expect it to lead to any monumental breakthrough towards a trade deal. If anything, we could likely see the 1 March deadline be pushed back and the reinstatement of tariffs get delayed.

That will be a short-term positive for markets but it isn’t going to be a lasting one. I reckon the meeting this week will set the tone for how soon we will see a Trump and Xi meeting down the road.

If talks this week fail to make substantial progress, I would expect the Trump-Xi meet to only come after further rounds of negotiations between trade representatives. That will keep markets guessing and in turn, result in more choppy trading for risk assets rather than a sustained rally.

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