Asia Update: All is quiet on the Trade War front

Stephen Innes SPI Asset Management

A tariff detent?

The WSJ reports that a potential US-China trade deal could include China offering more agriculture purchases, a joint pact to deter Beijing from devaluing its currency.

On the US side, suspending planned tariffs and relaxing export bans against China's Huawei.

While this should ultimately becalm markets, it could also be initially interpreted as a tad disappointing as a tariff detent falls well short of bridging the critical trust gap which is an implicit removal of a significant chunk of existing tariffs.

Still, one of the critical issues is that uncertainty regarding trade tariffs frightens CEO's and curbs business reinvestment and expansion. A detent should at a minimum remove a significant level of escalation uncertainly and if the de-escalation is framed as the first phase of an extensive road map to eliminating existing tariffs, ultimately this could be viewed in a favourable light.

The market, however, remains in wait and see mode

Japan and Typhoon Hagibis

Jeff Masters, a meteorologist with the magazine Scientific American, told the New York Times that if Super Typhoon Hagibis proceeds as predicted, it could be one of the most damaging typhoons in Japanese history suggest that more than a rugby match or two could be at stake. The Super Typhoon could leave a significant swath of carnage and flooding to the vital Japanese manufacturing industries.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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