US equities had a great deal of relief on news that the US and the EU are holding off from implementing new tariffs and will start negotiations. Both parties confirmed their willingness to reduce tariffs while European Commission President Jean-Claude Juncker pledged to increase imports of natural gas and soybeans (which is subject to a 25% tax by China). In return, the US should reassess duties on steel and aluminium that it introduced earlier to the EU. As a reminder, steel and aluminium tariffs were imposed on 23 March to China and 1 June 2018 to EU, Mexico and Canada.
Overnight, US equities were heading higher, the DJIA rose by +0.68% while S&P500 and Nasdaq increased by +0.91% and +1.17% respectively.
The NASDAQ 100 Technology Sector is approaching its historical high of 4496.59 (12/03/2018), currently given at 4414.50. On the European side, markets are recovering from yesterday’s loss, led by the DAX +1.40%, Euro Stoxx 50 +0.65%, CAC40 +0.65% and SMI +1.10% while FTSE 100 is neutral, thus announcing a good market session for the day.
However, despite current sentiment of relief on the marketplace, we remain sceptical that the trend will sustain. Indeed, Trump remains hard on China and no agreement has been signed with the EU. The move could also be a political manoeuvre to maintain strong ties with his supporters amid November US Congress midterm elections and in order to stay above water – as resistance is felt from public opinion and inside the Republican Party.
Showing some strength in yesterday late session, the USD is currently trading sideways against major currencies. Today’s loss against JPY (-0.25%) is expected to reverse in the afternoon. The pair is currently trading at 110.70 and heading towards 111.
Disclaimer: While every effort has been made to ensure that the datat quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.
Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.
By Vincent Mivelaz