Investors are hopeful that US and China would be able to strike a deal and there will be no more of a trade war. This very fact is leading the momentum in the markets today.
U.S. futures are trading higher as investors decided to ignore the pessimism from Wall Street. Last night’s sell-off was led by the tech sector. Apple and Amazon were the major culprits. Investor confidence was badly hurt when the news hit the wire that Apple’s sales outlook has been deteriorated, the company’s stock fell over 5 percent yesterday and the worst element is that Apple’s supplier’s stock had even worse sell-off; Lumentum Holdings, one of the top maker of iPhone facial -recognition sensors had it’s stock’s plummeted more than 30 percent and the theme was similar for other suppliers.
Having said, there is some optimism in the market as the talks between the US and China have begun once again ahead of the upcoming G20 meeting. Once again the hopes are that both countries would be able to strike a deal and put the woes of trade war behind them. Concerns around trade war have created a meaningful impact on the global growth and a lot of steam has come out of the equity market mainly because of this.
As for the currency market, the euro-dollar is still under pressure as the battle between Italy and Brusell over the Italian budget becomes more intense. Today is the deadline for the Italian government to resubmit their budget and we do not think enough progress is made on this. The EU previously rejected their previous budget and asked the country to resubmit the budget. The country is sticking to it’s original plan which includes higher benefit spending, reducing taxes and also lower the tax cuts. None of these gel well with the EU. Brussels told Italy several times already that the country needs to play by the rule or it will face tough measures. Today is that day for Italy.
Back in the U.S, Thersa May is closer in sealing a deal over Brexit- at least that is what she believes in her head. She has mentioned that she is confident that the UK is very close to “End game”. This is despite the fact that she has lost a lot of support in her own corner and the opposing members of her party have one united goal which is not the same for Mrs May.
President Trump could not keep it quite and he has taken more aggressive approach to cool off the recent bounce in the oil market. He has made it clear that he dislikes the Idea of OPEC and it’s members cutting down the supply. Trump likes to see the oil price to move even more from it’s current level. Remember that the oil price has entered in a bear territory when you compare it’s price from it’s recent highs.
