The official statement released from China was probably too succinct for investors to find any meaningful details of what had happened during the three-day meeting.
The commitment to buy more ‘US agricultural goods, energy and manufacturing products’ as mentioned in the US statement were completely missing from China side, which makes a lot of difference.
The trade optimism built over the last four trading days are facing a ‘reality check’, and Asian markets are giving up gains on disappointing trade statement this morning. Rising gold and yen suggest sentiment is turning to the cautious mode again, until more details of the trade talks are released to show concrete progression.
I remain cautious over the trade outlook, due to the complexity and divergence in the key disputed area – technology theft, intellectual property disputes, cyber securities etc., between the two countries. All these will take tremendous effort and time to be resolved, and both sides will have to reach a common ground to allow the two profoundly different economy to exist.
The motivation of reaching a deal is definitely strong, but we also need to be realistic and manage our expectations on the talks. This trade negotiation will extend beyond the 90-day period, but further tariffs are unlikely. Due to the unfavourable market impact seen in the last quarter, additional trade tariffs will be the last resort for the US in an event of trade talk break-up.
Brent Crude oil prices advanced 5% last night to a key resistance level at US$60 per barrel. The rally was fuelled by Saudi’s commitment to support oil prices and they are prepared to slash more outputs when necessary. The latest DoE Petroleum Status report showed 1.68 million barrels drop in US commercial crude inventory, the biggest weekly drop seen in more than a month.
Singapore market exhibited resilience against the broader sell-off in Asia, with Real Estates (excluding REITs) doing the heavy lifting in the STI, which is up 5 points during the first hour of trading.