This week is an opportunity for those who love volatility, we have a string of events which are going to keep the market participants on their toes.
The events which are going to gather the most amount of attention are: the U.S.- China trade deal, Theresa May’s efforts to avoid Brexit from derailing and Trump’s meeting with Korean president. To finish off we will also hear from Jerome Powell, the chairman of the Federal Reserve and Michael Cohen’s testimony in Congress.
Can it get any better? Probably, no, because a heap of geopolitical news along with economic data release is going to keep things really wild and this is going to bring several opportunities in the markets.
Trade Negotiations
Donald Trump decided that enough progress has been made on U.S.-China trade discussions, and in order to continue to sail in this direction, it is vital to not slap more tariffs on China- for now. The president was going to double the tariffs on more than $200 billion of Chinese imports on March 1st. Thanks to the constructive dialogues between the two countries which have avoided this situation.
Trump has decided to delay the process of adding tariffs on China (the official statement is still due). He is hopeful that the momentum will continue like this. The president wants to conclude the summit with Xi Jinping in Florida on a positive note. For now, everything sits under the label of “substantial progress has been made” and this has pushed the Chinese stock markets higher.
The Chinese CSI 300 index has jumped more than 4.6 percent, in order words, it is up nearly 20 percent from its low of Jan.3 and this is all on the back of the heavy volume, nearly three times the daily average. The 30-day price volatility has soared to 24.05 percent versus the average of 17.14 percent over the past month. Year to date, the index is up nearly 24 percent.
Brexit Deadlock
A deal in dessert has been touted a lot in the past few days as European leaders and British prime minister, Theresa May, are all attending a conference in Egypt. Departure terms are still untied between the two parties and there is no clarity what the future will look when it comes to Brexit. Lawmakers over in the parliament are fully prepared to seize the control of Brexit when the prime minister will return.
She is expected to come back home empty-hand, the EU leaders have made it clear several times that there is no deal except the current one. This gridlock in Brexit is running against time and the prime minister has openly refused to postpone the March 29 Brexit deadline. She has pushed back the deadline for a parliament vote on her Brexit deal, an attempt to buy more time and a huge gamble. Previously, she promised to bring a deal in the parliament on Wednesday, but now, it will only be a general vote. The chances are that her strategy is going to backfire because the MPs are likely to take control of Brexit and push the prime minister to the side. The lawmakers have decided to take the option of no-deal Brexit scenario off the table and they are frustrated with the prime minister because she was already granted more time at two different occasions, it is time for action now.
Jerome Powell and Michael Cohen’s testimony
Market participants would need to work extra hard on coming Wednesday because, on one hand, it will be Jerome Powell who will be giving his second testimony. Trade tariffs, Fed’s stance about its monetary policy and the health of the US economy (in the light of the upcoming US GDP data) are just some of the matters which will engage higher volatility. On the other hand, investors will have to keep an eye on Michael Cohen’s testimony. Trump’s former lawyer, Cohen, will be testifying at an open congressional hearing about his knowledge of the 2016 campaign, something Trump labels’s it as “Witch hunt”. In addition to this, Wednesday will also be the day when President Trump will meet North Korea’s leader Kim in Hanoi. All eyes will be on one key issue: Trump’s efforts to make North Korea abandon its nuclear arsenal.
