Stock Rally Stalls as Traders Try to Predict Trade War

By: DailyForex.com

Asian markets traded mixed in early trade on Wednesday as traders sought to understand what would happen next in the trade war that is threatening to erupt between the United States and China. On Tuesday, Chinese President Xi Jinping committed to opening his country’s economy and to lowering import tariffs on products like cars, shipbuilding and aircraft equipment. Though Xi’s speech did not specifically mention the U.S., his comments were met with optimism that a trade war could be averted. Global markets rallied following the speech.

U.S. President Donald Trump responded to Xi’s speech by tweeting that he was “thankful” for Xi’s kind words and his “enlightenment” on intellectual property issues.

As reported by Reuters, Moody’s Investors Service said on Wednesday that the direct impact of the proposed U.S. tariffs on China’s exports and economy will be limited, though the “knock-on effects” are expected to be wider. Moody’s said it expected that the negative impact a trade war would have on both countries would prevent a full-fledged escalation of the trade war.

On Wednesday, early gains were quickly reversed, and markets struggled to find direction. The Nikkei 225, the Kospi and the ASX 200 were all trading modestly lower as of 1:14 p.m. HK/SIN. The Shanghai Composite managed to eke out a 0.90 percent gain, as did the Hang Seng Index which was up 0.75 percent.

Currency Market Movements

The currency markets were also searching for direction early Wednesday afternoon in Asia. The dollar faltered slightly against its primary trading partners, sending the dollar index down 0.06 percent to 89.57, after it had remained above the 90 level for several days. The greenback was trading down 0.09 percent against the euro to $1.2365. It was also down 0.14 percent against the yen to 107.04.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.