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 aluminum that it introduced earlier to the EU. As a reminder, steel and aluminum tariffs were imposed in 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 Index is approaching its historical high of 4496.59 (12/03/2018), currently given at 4414.50. On 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 skeptical that the trend will sustain. Indeed, Trump remains hard on China and no agreement is signed with the EU. The move could also be a political maneuver 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.
By Vincent Mivelaz
