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Markets Rally As President Trump And Xi Call A Truce On Trade



  • Asian Indices trade sharply higher after President Xi and President Trump have agreed that the US will not impose a 25% tariff on Jan 1st, to retain 10% level for 90 days.
  • China agrees to purchase more from the US to work on imbalance, will work to reach an agreement on trade in the next 90-days
  • China has agreed to remove tariffs on Car imports
  • China Caixin PMI Manufacturing for November comes in line


  • European PMIs were mixed, France, Spain, Germany among those which beat forecasts, Italy misses, reaching an almost 4 year low.
  • Growth of production only marginal as demand continues to falter; Business confidence remains weakest in around six years
  • Reports from Italy suggest Italy preparing to accept new lower budget deficit targets in the range of 1.9-2.0%
  • UK Manufacturing PMI beats, companies remained confident on balance.
  • Dax, FTSE, CAC, Eurotoxx trade ~2% higher on trade optimism.
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  • US Futures trade sharply higher on Trump-Xi truce. Nasdaq futures over 2% higher in the pre market


  • (QA) Energy minister: country to withdraw from OPEC from Jan 2019; Not committed to OPEC agreements after exiting
  • (CA) Alberta (Canada): Mandates 325K bpd cut in oil output to ease supply glut and deal with low crude prices (~9% of total output), effective from Jan 2019; relates to oil-sands and conventional oil
  • Russia’s Putin and the Saudi Crown Prince discussed the oil markets, but no concrete decisions about oil output cuts were made.


  • (US) United States: The news that the Trump and Xi came to a truce, with China has agreeing to “reduce and remove” tariffs below 40% on imports of U.S. vehicles, according to President Trump, put a bid under the broader market. This may not be as big of a win as it is initially thought though. At the beginning of the year China had a 25% tariff on foreign cars, which it reduced to 15%. But after Trump hit China with tariffs, Xi pushed the US car tariff to 40%. So as and when details emerge the real question will be whether China will go below 15%.
  • (UK) United Kingdom: The immediate Brexit focus remains on the House of Commons vote scheduled for Dec 11th. Despite the best efforts of Prime Minister May and her allies to sell it, it looks likely it will be voted down. Over the weekend Agriculture Minister Michael Gove warned fellow Eurosceptic Brexiteers in the Conservative party that if members didn’t vote the deal through, there would be a good chance of another Brexit referendum as, he said, there could now be a majority in the House of Commons in favor of another public vote. The Labour party said it will table a no confidence vote in an attempt to remove the prime minister if the deal is voted down, and force a general election. Failing that, Labour said they would call for a new EU referendum.
  • (SK) South Korea: South Korean November PMI new export orders fell by the most in over 5 years with new orders shrinking by most in over 2 years. As one of the world’s most export-oriented economies, South Korea is sensitive to global growth. In good times it can be a magnet for speculative capital, which is why foreign investment has poured into the market in recent years.
  • (EU) Eurozone: Manufacturing PMI unexpectedly revised up to 51.8 from 51.5 in the preliminary reading, but still down from 52.0 in October and the lowest reading since August 2016. Importantly export trade declined for a third month running. Across the three main economies German growth appears to be slowing, France is dropping back towards stagnation and Italy reported a second consecutive month of supposed contraction. Markit reported “hopes that the soft patch may prove short-lived are countered by business optimism about prospects for the year ahead remaining among the gloomiest seen since the sovereign debt crisis in 2012”.



  • Indices [Stoxx600 +1.92% at 364.08, FTSE +2.25% at 7,137.18, DAX +2.61% at 11,550.95, CAC-40 +2.04% at 5,105.39, IBEX-35 +1.72% at 9,234.00, FTSE MIB +2.18% at 19,607.50, SMI +1.68% at 9,152.60, S&P 500 Futures +1.81%]

Market Focal Points/Key Themes:


  • European Indices trade sharply higher this morning following G20 summit agreements between U.S. and China, higher session in Asia and higher US futures. On the corporate front shares of oil and automobile giants trade higher on Russia’s President Putin and the Saudi Crown Prince discussion of the oil markets and Trump tweet that China agreed to reduce and eliminate tariffs on U.S. made cars, respectively. Vapiano trades higher after CEO appointment. McColl’s Retail Group is a notable decliner following issued profit warning. Following CEO comments on medium-term targets, French technological name STMicroelectronics trades higher almost 7%. On M&A front, Glaxosmithkline trades slightly higher after confirmation to divest Horlicks and other products to Unilever. Deutsche Bank trades higher after two days of raids last week and CEO comments refusing takeover talks. Looking ahead earnings include Finisar Corporation, RMR Group, Hexindai and Mesa Air Group.
  • Consumer discretionary: Unilever [UNA.NL] +0.5%, Glaxosmithkline [GSK.UK] 1.5% (GSK confirms to divest Horlicks and other products to Unilever for €3.3B in total), Vapiano [VAO.DE] +3.5% (appoints CEO), McColl’s Retail Group [MCLS.UK] -26% (profit warning), Starbreeze [STAR.SE] -65% (CEO to step down), Stobart Group [STOB.UK] -8% (trading update; dividend cut)
  • Energy: Total [FP.FR] +2.5%, Royal Dutch Shell [RDSA.NL] +2.5%, Eni [ENI.IT] +2% (To invest in a new polypropylene plant in South Korea; Russia’s Putin and the Saudi Crown Prince discussed the oil markets), Drax Group [DRX.UK] +1% (agreement with Iberdrola)
  • Financials: Deutsche Bank [DBK.DE] +3.5% (CEO refuses takeover talks), Banca Generali [BGN.IT] +4% (medium-term targets; acquisition)
  • Healthcare: argenx [ARGX.BE] +12% (collaboration agreement), Shire [SHP.UK] +1% (Takeda reaches agreement on $3.7B loan from JBIC for acquisition)
  • Industrials: Daimler [DAI.DE] +7%, BMW [BMW.DE] +6.5%, Volkswagen [VOW3.DE] +4.5%, Fiat [FCA.IT] +2.5% (Trump twitted regarding China to reduce tariffs on U.S. made cars), Implenia Ag [IMPN.CH] +2.5% (profit warning), Babcock International Group [BAB.UK] +1.5% (JV awarded major contract)
  • Technology: STMicroelectronics [STM.FR] +6.5% (CEO comments on medium-term targets)
  • Materials: K+S AG [SDF.DE] +7% (affirms outlook)


  • (QA) Energy minister: country to withdraw from OPEC from Jan 2019; Not committed to OPEC agreements after exiting
  • (IT) Italy Dep PM Salvini: EU cannot ask for a 1.9% target
  • (IT) EU Commission Vice President Dombrovskis: In intense contact with Italy; tone has changed, Substantial correction needed on Italy budget
  • (FR) France FinMin Le Maire: Current policies to end spending/taxes upward spiral; Tax cut and public spending cut must accelerate

Currencies/Fixed Income

  • Following progress in the trade talks, the USD has dipped on risk on sentiment; GBPUSD briefly traded above 1.28 before fading while the EUR/USD trades over 0.5% higher as overall risk on tone as well as Italian Budget deficit target compromise helping lift the pair. Oil futures trade over 4% higher as trade progress as well as a production cut in Canada lifted futures.

Economic Data

  • (IT) ITALY NOV PMI MANUFACTURING: 48.6 V 48.9E (2nd straight contraction)
  • (ES) SPAIN NOV PMI MANUFACTURING: 52.6 V 51.5E (61st month of expansion)
  • (CH) Swiss Oct Real Retail Sales Y/Y: 0.8% v -0.6%e
  • (CH) Swiss Nov PMI Manufacturing: 57.7 v 56.4e
  • (RU) Russia Nov PMI Manufacturing: 52.6 v 51.3e (3rd straight month of non-contraction)
  • (IE) Ireland Nov PMI Manufacturing: 55.4 v 54.9 prior (66th month of expansion)
  • (TR) Turkey Nov CPI M/M: -1.4% v -0.3%e; Y/Y: 21.6% v 23.0%e
  • (NL) Netherlands Nov PMI Manufacturing: 56.1 v 57.1 prior (63rd month of expansion)
  • (NO) Norway Nov PMI Manufacturing: 56.1 v 56.0e (5th month of expansion)
  • (PL) Poland Nov PMI Manufacturing: 49.5 v 50.3e (1st contraction in 47 months)
  • (HU) Hungary Nov PMI Manufacturing: 53.5 v 55.0e (36th month of expansion)
  • (DK) Denmark Nov Manufacturing PMI: 58.2 v 67.1 prior

Fixed Income Issuance

Looking Ahead

  • 10:30 (MX) Mexico Nov Manufacturing PMI: No est v 50.7 prior
  • 11:00 (IS) Iceland Q3 Current Account Balance (ISK): No est v 2.0B prior
  • 12:00 (IT) Italy Nov New Car Registrations Y/Y: No est v -7.4% prior
  • 13:00 (MX) Mexico Nov IMEF Manufacturing Index: No est v 49.7 prior; Non-Manufacturing Index: No est v 50.2 prior
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