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.