By Michael McCarthy (chief market strategist, CMC Markets and Stockbroking)
Investor sentiment lifted again overnight ahead of the signing of the first phase of a new trade agreement between China
and the US on Wednesday. Details of intended US concessions gave confidence. Shares and other growth assets rose, and US
indices hit new record levels. Oil bucked the trend as Middle East tensions eased, and the British Pound fell after
weaker GDP growth in November increased the chance of an interest rate cut next week.
The US has agreed to lift its designation of a China as a currency manipulator. The imposition of this tag in August
derailed trade discussions, and is a symbolic but important step. Tech shares benefitted, and the Nasdaq tripled the
daily gain in the Dow.
Easing Iranian tension broke the usual inverse correlation between gold and oil, and both fell. Cryptocurrencies were
caught in the downdraft. Despite the better outlook European investors remain cautious and continental indices edged
lower. The UK 100 index defied the mood as investors priced a potentially lower interest rate environment.
Asia Pacific investors are looking at a mixed trading day. Futures indicate gains for most markets. The Australia 200
index erased yesterday’s losses at this morning’s open.
If the trade agreement is signed investor focus will likely shift to company earnings reports.US financial stocks will
lead, with Citigroup, JP Morgan and Wells Fargo unveiling quarterly reports tonight.