The Dinner Date Moving Markets

It’s the dinner date that may well shape markets to year’s end.

Donald Trump and Xi Jinping’s meeting at the end of the G20 was big for markets

A cease fire in the trade war was a good outcome.

As good as you might have hoped for.

Good for both countries, but also for the rest of the world.

The trade war has been weighing down the market all year.

Markets should get a bit of a boost from the truce.

The US has agreed to delay its plan to raise the tariffs on $US200 bn worth of Chinese imports. It was set to rise to 25%, on 1 January.

Had the planned 1 January increase gone ahead, it would have been disastrous.

It would’ve impacted US corporate earnings and put the brakes on consumer spending.

So last weekend’s dinner between the two leaders was huge for markets.

The US agreement to delay tariffs was quite a concession. China, for their part, also came to the table. They’ve pledged to buy more farm produce and industrial goods from the US.

Treasury Secretary Steven Mnuchin, has been talking to media about the dinner meeting. He’s describing it as a breakthrough moment between the two leaders. That the two leaders responded on and agreed on specific issues during the three-hour dinner. In his words, it was a huge difference in what he’d seen over the last year and a half.

So, even though the tariffs have only been delayed, that gives a little cause for optimism.

Tense talks will start straight away. Both parties will have to hash out a lot of unresolved issues.

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A lot can still go wrong. Getting down to agreements on some of the details will be hard going. So an important few months coming up. And where the market goes from here will depend on how those talks proceed.

The market has been waiting for any positive news on this front. 

Will markets rally?

This truce might boost markets and see a bit of a rally to year’s end.

Remember, the US economy is in really good shape.

Corporate earnings growth is the strongest it’s been since 2010.

US manufacturing continues to expand, despite trade headwinds. New order growth just jumped to a five-month high. Job creation to a ten-month high. Factory payroll’s saw their largest monthly increase in over seven years!

US unemployment is the lowest it’s been in almost 50 years.

There’s some basis behind the thinking that the market can go higher. If only given half a chance on trade.

So, here’s some things to watch for now.

The trade truce will be good news for many US industrial stocks, so that’s a space to watch.

China might be removing tariffs on US car imports, so the US auto sector might be one to follow now.

It’s good news for US farmers and the listed companies that service that sector.

The other thing to watch also would be US listed Chinese stocks. There’s quite a few of these stocks listed in the US now. They should get a boost as well.

The trade truce also comes on the back of a bit of market rally last week on rates. Comments by Fed Chairman Jerome Powell suggests the Fed might slow down a bit on interest rate hikes next year.

So, there’s some helpful tailwinds for the market now.

Many stocks are well off their highs after the October correction.

That’s why I’ve been suggesting you build up the watch list over the last couple of months.

There might be opportunities in the market right now, after such a large correction.

The interest rates and trade war storm clouds have eased a little over the last week.

And if US indices break above key levels, then we might get a bit of a Santa Claus rally into year’s end.

Let’s wait and see.

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Terence Duffy,
Chartist, Phil Anderson’s Time Trader

Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come — which he details in Cycles, Trends and Forecasts.

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