Chinese president Xi Jinping's speech at the Bo’ao Forum is being read by markets as signalling a desire to deflate the simmering trade tensions with the US and a consequent relief rally sees equities, crude oil and smaller G10 currencies all trading higher as the European session opens.
But it's not as simple as that, notwithstanding Xi's promises to cut tariffs on imported cars and "open up" the economy. "This is simply the platform message we have got used to from Xi. Equities seem almost too eager to grab any slightly positive news , says Peter Garnry, Saxo' s head of equity strategy. "We remain negative on equities as rates (budget deficit) and the trade war will continue to be negative for sentiment," Garnry adds.
But however transient this latest resurgence in risk appetite proves to be, it is making its mark on everything from FX to commodities. The G10 smalls, including the commodity currencies, have rallied strongly and the Japanese yen has taken a hit, reports John J Hardy, Saxo's head of FX strategy. Unrelated to these moves, the Russian ruble lost over 4% yesterday in a very severe one-day slide and it could be in for a further battering should even more sanctions be placed on Russia because of the Syrian attacks.
Crude oil , meanwhile, is testing the higher end of its current tight range on Xi’s conciliatory tone on trade. "Raised geopolitical tension is adding an additional layer of support with the focus on Syria, Yemen and US sanctions against Russia," says Ole Hansen, Saxo's head of commodity strategy. Gold remains stuck between $1,310 and $1,355/oz with the dollar, stocks and yields in focus, he adds.
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.