A calm period ahead of the October 10-11th high level talks is not happening. Just like we saw in the previous lead up to high-level talks in the past, the White House is trying to increase their negotiating chip count with a fresh threat that could cripple Chinese companies. Risk aversion returned after news broke that the Trump administration is considering weighing limits on US portfolio flows into China.
Delisting Chinese companies would be disastrous for the US economy and we should not see the market take this threat too seriously. The limitation of American pension funds access to Chinese markets would see massive portfolio swings that spells disaster for the tech sector. This threat is harsh reminder that we could very easily see trade talks fall apart next month.
This story pretty came out of nowhere and the timing is terrible. US equities sold off strongly and safe-havens soared as much of Europe has already started their weekends.
West Texas Intermediate crude has now wiped away all the gains that stemmed from the Saudi oil field attacks. This key oil price gap has now been filled within two weeks and it seems price is tentatively finding support. The recent leg lower with crude prices occurred after Saudi Arabia agreed to a partial cease-fire in Yemen. This four-year war is unlikely to be ending soon and the risk premium is likely to return to crude prices.
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