Monday 03 December 2018
The latest G20 demonstrates some temporary progress in the US/China relationship. An increase of tariff rates in January 2019 was put on hold and the possibility for an additional tranche of tariffs for the rest of US imports from China ($267bn) is also further delayed, at least. China has found the right entry point to give some concessions to the US on sensitive topics for President Trump.
We believe that neither this scenario nor the worst case of no agreement was completely priced in the market, even though markets partially discounted a weak scenario, with some risk of deterioration of China/US relationship and China’s economic slowdown. This, combined with a more dovish Fed, could support a relief rally in the short term.