A 'phase-one' deal could be signed in weeks says Pimco executive
The US is planning to introduce new tariffs on Chinese goods next month and there are still fears about a global economic slowdown in 2020.
But investors opted for greater risk-taking Tuesday with trade in Asian and European markets gaining along with appetite for US equities futures. The MSCI world equity index of shares in 47 countries posted a 0.1% increase to its highest point in 22 months.
Despite concerns, China bulls believe there is plenty of opportunity in the country, including Tyler Mordy, president and CIO of Forstrong Global, who told WP that China is at a crucial inflection point.
And Beijing loosened monetary policy Monday with a surprise cut in its short-term lending rate, its first since 2015, prompting speculation that further stimulus could be ahead.
There has been little clarity in the trade dispute between the US and China but that has not deterred investors from an optimistic view that the world’s two largest economies would find common ground.
The signals are mixed currently with Beijing reportedly downbeat on a deal being reached anytime soon conflicting with signs that the White House may extend a licence for firms to do business with China’s Huawei telecoms firm.
Early Christmas gift?
The managing director and vice-chairman of asset manager Pimco said he believed a preliminary agreement could be signed before Christmas.
John Studzinski told CNBC that, despite some larger challenges around agriculture, some technology issues, and enforcement, he expects some form of agreement to be tabled early December and signed off within a few weeks.
“And I think Trump sees this as important. He’s gotten a lot of endorsement from American CEOs who want to see some type of stabilization and anchor in this broader relationship and trade dialogue between China and America,” he added.
Skeptical analysts
However, even if a deal is reached, some analysts are keeping expectations in check amid reports that equities would jump.
“We don’t think that there is much scope for global equities to receive a further boost from a trade deal along the lines of what is being reported,” Simona Gambarini, a markets economist at Capital Economics commented in a client note.
On the global economy, there appears to be rising sentiment with fears of an imminent recession fading.
“Consensus is assuming that there will be a cyclical upturn,” Stéphane Barbier de la Serre, a strategist at Makor Capital Markets told Reuters. “It’s like the market lowered its guard on the big risk metrics — and that has triggered a reweighting of funds from bonds to equities.”
