There is no doubt that China and the United States are probably going to negotiate more on trade issues. The forthcoming meeting of the two leaders at the G20 summit boosted US financial markets, confidence rose, leading to strong gains overnight.
The S&P 500 is up nearly 1%, and is now very close to the all-time high it reached on May 1.
Meanwhile, the Dow Jones industrial average jumped more than 350 points, or 1.35%, while the NASDAQ composite index rose 1.39%.
Meanwhile, bullish sentiment helped fuel a rally in oil prices. U.S. WTI light crude futures closed 3.4 percent higher overnight, while London Brent crude futures closed 1.8 percent higher.
That’s because some traders think the prospect of less trade friction will be good for global trade and good for oil demand, thus giving the oil market a positive outlook. In addition, the central bank’s policy meeting was also a major factor affecting the market this week. U.S. stocks rose and that is partly because the Federal Reserve is close to announcing its meeting, and the market is in a state of readiness. While the market doesn’t expect the fed to cut rates anytime soon this month, it will be interesting to see if the fed changes the wording of its previous statement to signal further rate cuts.
Currently, federal funds futures, a measure of policy probability, show only a 22.5 per cent chance that the fed will cut rates this month, but an 85 percent chance that it will do so in July, so the importance of this fed statement is evident.
The interesting news is that President trump, who likes to criticize the Federal Reserve on the issue of interest rates, is not idle at this time. Asked on Tuesday whether he would consider demoting fed chairman Powell, Trump said: let’s see how he does. Trump not only critics the fed, but also the ECB. Mario Draghi, ECB President, released a very dovish note overnight, saying the central bank would ease policy again if inflation did not return to target. That makes it likely that the ECB will cut rates again.
So we also immediately saw a reflection of the Euro against the dollar, which quickly weakened to a two-week low.
At the same time, we are also seeing significant gains in European stock markets. Germany’s DAX rose more than 2%, Britain’s FTSE 100 gained 1.17%, and France’s CAC jumped 2.2%. As a result, Trump also criticized Draghi, saying the comment immediately lowered the value of the Euro against the dollar, making it easier for them to compete with the United States, and that is unfair. The fed and Powell will release the fed’s latest statement at 2am Beijing time on Thursday. We will keep an eye on this issue.