News & Analysis

US-China Trade Deal Meeting Eyed

August 14, 2020

By Deepta Bolaky

Investors weighed the geopolitical tensions and standoff by the US Congress against the improving economic data while still monitoring the spread of the outbreak. While there were early signs of a slowdown in the number of daily coronavirus cases in the US, we are seeing more clusters in other countries. 

As the week comes to an end, investors mulled over the US-China trade deal talks scheduled for this weekend.

Stock Market – Global Stocks Erased Losses for the Year

The improvement in the economic data continues to provide support to the stock market despite the mounting number of COVID-19 cases. Global stocks erased all of its 2020 losses on the back of the amount of stimulus being injected in the pandemic-induced economy. 

Source: Bloomberg

Major US equity indices flirted near record highs levels this week driven by the outperformance of mega-cap tech stocks. The US share market is showing strong resilience despite the looming recession and a pandemic with no immediate end in sight. Ahead of the US election which will take place in less than 3 months, investors will likely eye the stimulus relief package.

Source: Bloomberg

Asian shares also managed to erase all of the losses fueled by the pandemic. MSCI Asia Pacific Index rose to the 2019 closing level.

Source: Bloomberg

Forex Market

In the forex market, major currencies were mixed against the US dollar. The greenback attempted to regain some momentum but was dragged by concerns over the mounting number of infections, uncertainty around the next round of stimulus package and escalating tensions between the US and China.

Source: Bloomberg Terminal

The New Zealand dollar emerged as the worst-performing currency dragged by a dovish RBNZ, new coronavirus cases in Auckland, and downbeat China macro data. On the economic front, data was mixed across the board:

  • Australia: Business conditions rose 8pts in July to 0 index points, continuing the recovery since reaching a trough in April. The improvement in conditions was broad-based across states but the monthly outcome was mixed across industries. However, Business confidence fell sharply in the month after rebounding strongly in recent months. Across all industries, retail and construction have the weakest confidence despite the relatively small declines in the month. The Westpac-Melbourne Institute Index of Consumer Sentiment also fell 9.5% to 79.5 in August from 87.9 in July. The scale of the fall comes as a major surprise. At 79.5, the Index is back near the extreme low of 75.6 seen back in April when Australia entered a national lockdown. 
  • New Zealand: The RBNZ kept Official Cash Rate (OCR) on hold at 0.25% but agreed to expand their Large Scale Asset Purchase programme from $60 billion to $100 billion.
  • UK: Jobs data were mixed. The unemployment rate remained at 3.9% in June, but claims rose by 94.400, above the 10,000 expected. The Industrial and Manufacturing index came above forecasts in June. However, UK gross domestic product (GDP) is estimated to have fallen by a record 20.4% in Quarter 2 (Apr to June) 2020, marking the second consecutive quarterly decline after it fell by 2.2% in Quarter 1 (Jan to Mar) 2020. There has been record quarterly falls in services, production and construction output in Quarter 2.
  • Canada: The national trend in housing starts increased for a second month in July. The trend was 204,376 units in July 2020, up from 199,778 units in June 2020. The national trend in housing starts increased for a second month in July. The trend was 204,376 units in July 2020, up from 199,778 units in June 2020.
  • Germany: In August 2020, the ZEW Indicator of Economic Sentiment for Germany increased again significantly compared to the previous month, after having declined slightly in July. Expectations are now at 71.5 points, 12.2 points higher than in the previous month.
  • United States: The CPI was up 1%, while the core yearly reading printed above expectations at 1.6%.

Oil Market

Crude oil futures are poised for a weekly gain lifted by the broad optimism, and bullish EIA and API reports that showed a decline in crude oil inventory stock. The oil market ignored the pessimistic IEA report which revised down both their 2020 and 2021 forecasts. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading higher at $42.41 and $45.16, respectively following the turnaround in risk sentiment.


Gold plunged from recent record highs and slipped the most in seven years. As of writing, the XAUUSD pair is currently consolidating around the $1,950 mark. A peak or a temporary retracement? The positive vaccine updates and the broad optimism have sent gold tumbling on earlier this week. After a great run to the upside, some correction was inevitable. Bulls and bears are to monitor the support levels for fresh trading impetus.

Source: Bloomberg

By Deepta Bolaky

Key Upcoming Events

  • Business NZ PMI (New Zealand)
  • NBS Press Conference, Industrial Production, and Retail Sales (China)
  • Gross Domestic Product (Eurozone)
  • Retail Sales, Nonfarm Productivity, Unit Labor Costs, Industrial Production and Michigan Consumer Sentiment Index (US)
Monday, 17 August 2020 
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.656 0 0.078 0.056 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 2.508 0 0

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