US-China trade negotiations will continue this week

IFC Markets

Master Trader
Oct 31, 2012
London (Great Britain)
All US stock indices rose due to the success in US-China trade negotiations

The Dow Jones industrial average and Nasdaq rose for the 8th consecutive week. This week, the US-China trade negotiations will continue in Washington. Previously, they were held in Beijing. White House press secretary Sarah Sanders said that there was certain progress in bilateral negotiations. It is assumed that mutual claims will be settled before March 1, when the US planned to increase duties on Chinese goods worth $200 billion a year. Of course, this would have caused China’s backlash. Now, the likelihood of the trade conflict escalation has noticeably decreased. Due to this, stocks of US companies which are sensitive to tariff increases and a large share of exports to China demonstrated a noticeable growth: Boeing, United Technologies, Caterpillar and 3M. 80% of companies from the S&P 500 list have already reported their earnings for the 4th quarter of 2018. Investors expect a quarterly increase in total profit of US companies by 16.2%. The forecast of the decrease in total profit in the 1st quarter of the current year deteriorated to minus 0.5%. The ICE Dollar index fell slightly on Friday after Mary Daly, the president of the Federal Reserve Bank of San Francisco, said that the Fed would not likely raise the rate in 2019. Today, most American markets do not work due to the holiday - Presidents Day.

EURUSD rose last week after two weeks of decline

The euro did not managed to rise above the psychological level of 1.13. A negative factor was the opinion of a member of the Executive Board of the ECB Benoit Coeure that the European regulator is likely to start a new phase of monetary policy easing at the expense of the money issue - TLTRO. More accurate information may appear at the next meeting of the ECB on March 7, 2019. On Friday, European stock indices dropped slightly, which may be caused by making profit. Over the past week, the EU Stocks 50 Index has grown by 3%. Amid the interim success of the US-China trade negotiations and the statement by the ECB representative, stocks of European banks, car manufacturers and the mining sector were in great demand. Stock prices of the French media company Vivendi rose by 5.6% due to good earnings report.

Japanese Nikkei updated 2-month high

As in other countries, the main reason for the growth of the Japanese stock market was the progress of US-China trade negotiations. Investors believe that this will help the economy of China. Accordingly, stocks of companies with a significant share of exports to China were in great demand in Japan: Komatsu (+ 3.1%), Fanuc (+ 2.9%) and Hitachi Construction Machinery (+ 4.6%). In addition, due to the increase in oil prices, stocks of oil companies rose: Showa Shell Sekiyu (+ 5.2%), Idemitsu Kosan (+ 5.8%), Inpex (+ 3.6%). Tire manufacturing company Bridgestone announced plans to buy back its own stocks in the amount of 200 billion yen, and they grew by 7.6%. The Australian and New Zealand dollars continued to strengthen amid the progress of US-China trade negotiations.

Wheat prices fell to 4-month low

The decrease in grain prices was due to the report by Algeria's state grains agency OAIC that it managed to buy wheat at an international tender for $15 per ton cheaper (or 5-6%) than at the beginning of January of the current year. Who was the seller is unknown yet. An additional negative factor for quotations was the increase in grain harvest forecast in Russia in 2019 by SovEcon company to 126.1 million tons. The official forecast by the Ministry of Agriculture of Russia is noticeably lower and amounts to 118 million tons. SovEcon also noted an increase in wheat exports from Russia by 9% to 27.8 million tons in the period from July 1, 2018 to February 14, 2019.