G20: the failure of trade negotiations will bring down the Chinese market
Despite the weak start, US stocks fell with growth of 0.3%-0.4%, building on the rebound. The news is saying about the positive sentiment in the markets, due to expectations of a meeting of the leaders of the United States and China in the upcoming weekend. In our opinion, do not much rely on the results of this meeting.
Neither side has been willing to retreat from its position in resolving trade disputes. Besides, trump has toughened rhetoric: in his words, “extremely unlikely” that the United States will refrain from imposing high tariffs since the beginning of 2019.
Worse yet, neither the US nor China have not yet felt the full effect of the imposed measures. The fees were aimed at reducing trade imbalances, but on the contrary, during the year sought to increase the purchase to avoid the next stage of the tightening. To date, we have close to the record deficit of foreign trade of the United States and China.
Later today comes the next portion of data from the States on trade in goods in October, which is the expected expansion of the deficit. These indicators can be used by the American side to strengthen their position in negotiations.
Nervousness concerning the upcoming meeting and emerges on the currency market, where the dollar returned to the area of the highs of the current month – above 6.95 yuan. Stock index of 50 blue chips gaining 1.3% on Wednesday morning but remains near multi-month lows. Quotations of the American currency are rising for the fourth consecutive session. The dollar index is back 16-month highs.
In all three cases, proximity to extrema attracts the attention of market players and, in the case of receiving a clear signal may be the beginning of a significant rally.
More likely to preserve the current trend in the rise of the dollar as a protective asset and further uncertainty in relation to trade tariffs. In this case, a breakthrough of resistance the dollar Index at 97.50 could send Google + to the round level 100.
In the case of weakening China A50 below 10800 (which is likely if the parties will not find common ground), this index is able to revert fairly quickly to the area 10000-10100 to the lower border of the consolidation levels of the beginning of 2017.
Yuan to the failure of the talks at the highest level can serve as a starting point and subsequent reduction. The weakening of the yuan may be the easiest of the available methods support the economy. In fact, since April, his downward motion is 11%, which is comparable with the existing now 10% tariffs.