US President Donald Trump’s comments on Tuesday at the sidelines of the NATO summit in the UK’s London that a trade deal with China may have to be reached only in later 2020 weakened the already-frail market optimism.
“In some ways, I like the idea of waiting until after the election for the China deal. But they want to make a deal now, and we’ll see whether or not the deal’s going to be right,” Trump said, triggering a sharp drop in American and Asian stocks, as investors fled to government bonds and safe-haven assets while the dollar index fell.
A sliver of hope
However, on Wednesday, Bloomberg news reported that the US and China were getting closer on agreeing on the amount of tariffs they would be willing in rolling back ahead of the much-discussed phase-one trade deal, despite flaring tensions over Hong Kong and Xinjiang.
The US House of Representatives overwhelmingly supported a bill, 407 to 1, on Tuesday that requires the White House to harden its response to China’s internment of hundreds of thousands of Uighur Muslims in the autonomous Xinjiang province.
China’s Foreign Ministry on Wednesday said a Sino-US trade deal could only be reached “on the basis of equality and mutual respect.”
“We will not set any timeline or deadline for a trade deal with the US,” a spokesperson for the ministry said when asked about Trump’s comments earlier on pushing an agreement well into late 2020.
“The US will pay the price over Hong Kong and Xinjiang bills. No one should underestimate our resolve to safeguard China’s interests,” the ministry told the media about the US policy regarding HK and Xinjiang.
Opec discussing cuts
OPEC+ is discussing ahead of its December 5–6 meeting whether to go for deeper oil output cuts and extend the current policy well into 2020.
“A deeper cut is being preferred by a number of key members within OPEC… my understanding is that they (Saudis) do (prefer it),” Iraqi Oil Minister Thamer Ghadhban said ahead of the meeting in Austria’s Wien.
Oman’s Oil Minister Mohammed bin Hamad Al Rumhi was another member supporting deeper and longer supply cuts. “The recommendation the Oman delegation is taking to Vienna is to expand the oil production cuts until the end of 2020,” Rumhi said.
US Oil stocks
US crude oil inventories dropped last week. The industry group American Petroleum Institute (API) reported that crude oil stockpiles saw a fall of 3.7 million barrels, more than double the forecasts for a drop of 1.7 million barrels.
The Bank of Canada (BoC) is holding its monetary policy meeting on Wednesday. The BoC is expected to unanimously hold its 1.75% rates unchanged, preferring to go along by resisting the cuts by other major central banks. Market focus will be on the language the banks will use in its statement.