Dubai: Positive news inflow are expected to keep up positive momentum in global equities, and fan risk appetite.
The United States and China has been having positive meetings on trade negotiations, and they have reached a consensus in principle on some key issues, Chinese media reported last week.
Trade conflict was the number one headwind for global fund managers and analysts, which had the potential to rock the recovery in global economy and markets.
The US government had warned that tariffs on $200 billion (Dh735 billion) worth of Chinese goods could be increased to 25 per cent from the current 10 per cent on March 2, if the sides could not find an agreement by then.
“While a deal may not be reached in time for the deadline, the positive vibes coming out of the latest meetings point to an eventual resolution in the trade dispute. The positivity could keep risk-sensitive assets supported for a while yet,” said Fawad Razaqzada, Technical Analyst at FOREX.com.
Global equities have been gaining since the start of the year, marking a turnaround in adverse sentiment witnessed in the last quarter of 2018. The Dow Jones Industrial Average gained 1.75 per cent on Friday, adding more than 10 per cent gains in the year thus far. The Dow Jones index has extended gains for eight weeks in a row, the longest since the week to November 3, 2017. The S&P 500 index also gained 1.09 per cent higher at 2,775.60. The S&P 500 index has gained 10.72 per cent since January 1.
“Financial markets in the short-term are relieved the government will be funded, despite a legal dispute on emergency powers, and expectations are high we will not see an escalation in trade tariffs as China and the US appear close to reaching a memorandum of understanding,” said Edward Moya, Senior Market Analyst at OANDA.
The positive news flow on the trade front and avoidance of a further shutdown is also considered positive to the US dollar.
The dollar index ended almost flat at 96.92, after gaining 0.78 per cent since January 1. “The Dollar Index has held its own quite well over the past two weeks and is currently positive on the month. Part of the reason why the dollar has remained supported can be explained away by weakness in data and dovish central banks elsewhere, keeping foreign currencies undermined,” Moya said.
“Gold’s refusal to break below $1,300 despite significant progress and optimism signals that the market may be focused on the slowdown that is developing in the US. A softer US economy could further cement a dovish Fed, which could help the yellow metal resume its’ recent rebound,” Moya said.
Gold prices touched their highest level in two weeks at $1,321.88 an ounce on Friday. “Momentum traders may be on the sidelines and waiting to see if gold is eventually able to take out the 2019 high of $1,331,” Moya added. Gold prices have gained 2.63 per cent so far in the year, after losing 4.43 per cent in 2018.