Xi wants Huawei Ban Lifted; EU throws Iran a Bone

US stocks index futures were initially climbing on optimism that President Trump will delay additional tariffs and that the world’s two largest economies will have a reset in trade talks.  Last month, talks were close to a deal after both sides seemed to be agree on Chinese purchases of US goods, intellectual property rules and market access.  It all fell apart after China backed out of making changes to their law and that was a deal breaker for Trump as he wants to see structural reform in China.

Just as important for China is the optics of how a deal is reached.  They do not want to appear weak and succumbing to US pressure.  US officials are trying to temper expectations from becoming too optimistic, but with stocks near record territory, it appears markets are fairly convinced some good will come out of Osaka this weekend.

Equities took a small reversal after the Wall Street Journal reported “Beijing is insisting U.S. remove its ban on the sale of U.S. technology to Chinese telecommunications giant Huawei Technologies Co. Beijing also wants the U.S. to lift all punitive tariffs and drop efforts to get China to buy even more U.S. exports than Beijing said it would when the two leaders last met in December.”  It seems like this could easily get shot down by President Trump and US indexes returned near the lows of the day.

Iran

European governments do not want Iran to abandon the 2015 nuclear deal and seem prepared to offer a credit line to help a special mechanism to enable trade with the West.  Iran’s economy has been crippled by US sanctions and the resumption of making weapons-grade material next month has motivated Europe to provide Tehran with an offer.  If Iran violates the old agreement, the EU will threaten to remove this barter-like solution that would alleviate a lot of economic pain in the short-term.

 

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya