Spreadex Market Update

Markets ignore US protests, focus on better than expected Trump-China statement



Once again expressing how the market often likes to divorce itself from reality, the eruption of protests across the USA meant little to investors, who instead celebrated the fact last Friday’s Trump press conference went slightly better than forecast.

In that anxiety-inducing address, the President announced the USA would be revoking Hong Kong’s preferential treatment status for trade and travel, no longer viewing the region as ‘autonomous’ from China.

Given what markets were expecting – something that would more explicitly damage the US-China trade deal – this news was actually a relative relief. However, that relief might prove to be short-lived. Even if the move didn’t cause the immediate disintegration of the trade deal, it is another issue for the two superpowers to be at war over, joining their precarious trade relationship, and the President’s repeated attacks on China relating to the covid-19 pandemic.

And as the November election draws closer and closer, and the domestic situation in the US remains explosive, Trump is only going to be looking to more aggressively play the blame game with China in an attempt to find a scapegoat for his own failings.

Not necessarily known for their long-term thinking, the markets decided that none of this really mattered on Monday. Instead they rebounded hard. The FTSE added 110 points to near 6170, with the DAX back above 11800 thanks to a 200 points increase, and the CAC sitting pretty the right side of 4750 following a 1.6% rise.

As for the Dow Jones itself, it is looking to climb half a percent this afternoon, aiming to once again cross 25500 – not quite back to last week’s highs, but en route.

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