Commentary on financial markets – February 2019
Highlights:
- U.S. and China close in on reciprocal trade deal
- UK: Brexit pushback
Commentary:
After a strong correction at the end of last year, equity markets have done well so far this year. The flow of mostly good news continued in February, bringing with it gains in both developed and emerging markets.
Chinese equities posted the strongest gains, benefiting from optimism that an agreement will be found between the US and China on mutual trade. US President Donald Trump confirmed in February that he would delay imposing new tariffs on Chinese goods. He also confirmed that he was going to meet his Chinese counterpart Xi Jinping at his Florida resort if further progress was made. Trump announced that the U.S. has made substantial progress in trade negotiations with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency and many others. As a result of the productive talks, he will postpone tariff increases from the U.S. side. If the two sides make further progress, Trump intends to hold a meeting with the Chinese president to conclude an appropriate agreement.
British Prime Minister Theresa May’s plans going forward include up to a two-month delay of the UK’s departure from the EU. Government officials have prepared a series of alternative solutions in an attempt to prevent resignations of ministers who are determined to support the proposal of a section of MPs to reject Britain’s exit from the EU without a deal. The postponement of Brexit is positive news for European stocks, showing that the British appetite to actually leave the EU with everything is getting smaller.
Donald Trump’s meeting with Kim Jong-un ended in failure. The North Korean leader wants to keep his nuclear weapons and there will be no deal. So the second meeting between US President Donald Trump and North Korean leader Kim Jong-un ended prematurely without a joint lunch. The White House says no joint declaration will be signed. Trump said at a press conference that Kim is demanding the complete lifting of all sanctions on the DPRK, but at the same time wants to keep part of the nuclear arsenal. However, the North Korean dictator’s current actions may be a negotiating tactic that may allow him to reach the best possible position to seek a compromise. That is also why the stock markets have not paid much attention to this negative news.