Chinese investors monitor stock prices at a brokerage house in Fuyang in central China’s Anhui province on Friday. The economies of Asia’s largest — China and India — have been continuing to benefit from lower commodity prices. Analysts says the two countries are the most preferred markets. Image Credit: AP

Dubai: Rising optimism over trade negotiations between the United States and China may fan risk appetite in global equities further.

Reports suggested that both the presidents of the United States and China might meet in March to announce a trade deal, with White House adviser Larry Kudlow saying that they are on the cusp of an “historic” agreement.

The Dow Jones Industrial Average closed 0.43 per cent at 26,026.32 on Friday, resulting in 0.02 per cent decline in the week. The S&P 500 index closed 0.69 per cent at 2,803.69, after gaining 0.59 per cent in the week.

“A trade deal could be around the corner, both parties are in the final steps of finalising them. This shows that tremendous progress has been made... Once again, Wall Street is ready to kick start the new month on the front foot,” Naeem Aslam, chief market strategist at Think Markets said.

The major indices in the US have jumped 11 per cent gains so far in the year. The turnaround in sentiment was largely due to a change in stance from the US Federal Reserve, which changed its tone from hawkish to dovish. The central bank said last week that weak policymakers expect rates to be on hold for now due to low inflation and tightening financial conditions in both the US and other economies.

“The key risk now is if no trade deal is achieved at the end of it all, although that looks increasingly unlikely. For now, therefore, momentum appears to be on the upside. But sooner or later, stock market investors will start focusing on something else,” Fawad Razaqzada, technical analyst at FOREX.com, said.

Traders will set their sights on the US jobs report, and Federal Reserve chairman’s Jerome Powell speech later in the week. The European Central Bank is also due to meet on Thursday.

“With Friday’s soft US macro data triggering a so far short-lived risk-off response on Wall Street, it will be interesting to observe how the markets will react should next week’s data also disappoint expectations,” Razaqzada said.

Gold outlook

Gold prices fell 4 per cent from a near one year high of $1,347 (Dh4,947) an ounce last week. Gold prices fell 2.67 per cent in the past three sessions.

“Gold may attract profit taking from $1,350. We expect a decline back towards 1,280/1,260 support levels,” said Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities in a note, FABS had a buy of $1,210 in gold in December last year for a target of $1,350, and that target was met last week.

Aslam from Think Markets said that $1,300 an ounce level is a critical point for bulls and bears.

“I do believe that as long as the price stays above this, the odds are in favour of higher price,” Aslam added.