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Trade talk expectations unsettle equities markets

Published October 9, 2019

By Rhys Miles

No surprises that with the commencement of trade talks, concerns over escalating tensions between China and the US would be reflected in equities markets. Last night the Dow fell 1.20%, the Nasdaq lost 1.70% and locally the ASX is forecast to lose around 1%. The American’s decision to blacklist a number of Chinese companies over Chinese involvement in alleged human rights abuses on the Muslim Uyghur minority is a new tactic that wasn’t expected only weeks ago and doesn’t instill confidence in the outcome of the talks even at this very early stage. Additionally, reports overnight that the US is considering limiting the volume of Chinese stocks that US pension funds can invest in is contrary to denials from the Trump administration only one week ago and has heightened fears that trade sanctions could transform into capital market restrictions.

The aforementioned trade issues overshadowed what would otherwise have been market supporting comments from US Fed chairman Powell who stated overnight that recent weakness in the US economy belies its fundamental strength, that recent rate cuts are a part of mid-cycle adjustment and that the Fed is on standby with policy support if required.

No real change on the currency front in regard to the ranges often referred to.