The US and China trade war is on ‘On Hold’
China would have to import more agricultural commodities
S&P500 index has climbed above an important level of 2700.
‘On Hold’ is the term driving the markets today and investors over in Europe are optimistic as trade war tensions have eased off. The US and China trade war is on ‘On Hold’, both countries have decided that making threats to each other isn’t going to yield any positive outcome. Both countries have decided to work towards a long-term agreement, in other words, there may be no solution to this at all and both countries may just continue to trade with each other under the same old terms. Although, the US Treasury secretary is more optimistic about this and his view is that the new framework set up by him would address the imbalance in trade in future.
Perhaps this entire mess could have been avoided if a framework was established before and the tweets were done after that. Nonetheless, one thing is clear, China would have to import more agricultural commodities in order to help the US trade balance. Both sides have retracted from their threatening behaviour and the US has suspended $150bn worth of tariffs on Chinese imports. Let’s see if the US hopes about China buying a substantial amount of US goods become true.
European markets are set to pick up the momentum where they left off last week. Not all European markets have seen buyers jumping on the risk on side. Italian markets experienced more selling pressure because of the unrest in the political situation of the country. A new populist coalition government is the last thing that you want to see after the Brexit mess. The Italian ten-year yield soared as a result of this and crossed the 2.2% mark.
Yes, surely, the rising Italian 10-year bond yield and the dire political situation would also an impact on other countries as well but for now, the weaker euro effect is stronger. The Euro has retraced from 1.2555 to 1.1739, a huge bearish move which has been behind the bull rally for the European markets.
Over in the US, despite the strong dollar, the S&P500 index has climbed above an important level of 2700. This sends the bull signal to the market especially when rising oil prices and the higher dollar are both adverse. Higher oil prices are going to impact the US consumers which is always very sensitive to oil prices. The upcoming FOMC minutes this week could fuel the dollar rally even further if the Fed doesn’t tame its hawkish stance.
Higher oil prices and a shortage of pilots are going to be the two major factors which Ryanair wasn’t fully prepared to tackle. The airline firm had to give in to keep the pilots as there is a massive shortage of pilots around the world- there are more planes than pilot and airlines are fighting hard to get them.
This made the company to issue a warning to its investors and it wants to prepare them for the first slump in its annual earning since 2014. Ryanair had to accept unionization and increase in pay, this has left a 100 million euro hole and the sharp increase in oil prices have made things only worse. The scrapping of over 20K flight back in September 2017, refunding clients for their tickets and failing to engage the union in time, are just some of the few factors that made the stock price to feel the pressure.
