US China trade agreement already largely priced in
by David Fleschen
It had announced itself yesterday afternoon with a tweet from US President Trump: The US and China agreed last night on a “phase 1 agreement” in the trade dispute. Although details are not yet officially known, various media report that the existing tariffs will be reduced and the planned increase in US tariffs on Chinese goods will not be implemented on Sunday. In return, China has committed to buying US agricultural products. The deal is supposed to be signed today. This further feeds the already good mood on the financial markets. Yesterday, the US stock markets rose to new record highs and today, the markets in Asia are growing significantly. Copper has risen to a 7-month high of USD 6,200 per ton in this mixed situation, but overall the rise in industrial metal prices on the news is cautious. We think a trade deal was already largely priced in. And the real work is only beginning now. So far, many critical issues have been left out. In our view, the next phase on the way to an extensive trade agreement between the United States and China should be much more difficult. The current euphoria should soon go away. And then market participants should look at fundamental data again. And they point to supply surpluses in almost all metal markets. Coupled with the weak economy, we therefore mostly expect lower metal prices next year.
Source: Commerzbank Research, Photo: Fotolia