China and the U.S. have agreed to 'cancel existing tariffs in different phases.'
Asia Warp
The Yuan
The yuan remains the center of attention in the Asia currency market.
There was a lot of short covering on USD/CNH today on the back of the delay dither. But the yuan weakness was likely getting exacerbated by position squaring ahead of tomorrow's China October trade numbers and CPI on Saturday. The data is expected to be a pretty toxic combination for local risk markets and will likely reinforce the critical constraints tethering PBOC policy to an anchor.
Depending on what side of the trade talk coin you're on, it may have been an excellent opportunity to re-engage yuan longs given that most of the assumed delay to December headline damage has been done.
But what is very encouraging from my seat is that President Trump hasn't taken to Twitter to launch one of his infamous Twitter tirades. With an election year looming, surely the President would prefer to resolve trade issues, which suggests he might be more inclined to make those compromises.
Bonds
JGBs continued selling off, down to 153.19 from 153.40 with talks of fiscal stimulus continuing to spook traders.
In its first euro-denominated sovereign bond sale in 15 years, China issued EUR4 bn worth of bonds, as the country moves to diversify away from dollar funding amid the trade war. Demand was keen for the China debt, with the MoF saying that issuance had beat expectations by receiving more than EUR20 bn worth of bids, of which 57% came from Europe.
Equity markets
E-minis fell to 3068 before the China market opened on delays in the U.S.-China trade talks. But have since stabilized and started to vector higher into the European open. The ASX 200 advanced strongly, driven by one of the results from one of the big four banks. Elsewhere in Asia, the Nikkei slipped 0.07%, Hang Seng down 0.34% and CSI 300 down 0.19% as the trade delay sapped the life out of risk markets in Asia while some expected profit-taking ahead of tomorrows China trade data weighed on sentiment also.
Gold markets
There is too much unquantifiable uncertainty around trade talks for anyone to correctly factor in these on and off hiccups. So, if you are trading gold based on a trade talk flip of the coin well you've come to the correct drop off point.
But what matters for gold, and I hate to sound like a broken record amid all the inane theories on why gold should or should not go higher. What ultimately matters more for gold is the hard and exact inverse correlation to U.S. yields and the U.S. dollar. With U.S. 10-year nominal yields loitering around 1.85 % and the dollar looking more attractive gold loses some of its shine.
Currency markets
Not too surprising with the mild risk-off tone AUD and NZD have come off their peaks. And while NZD shorts are starting to build ahead of a probable RNBZ rate cut on Nov 13 but for the most part traders on the higher risk beta pairs are in a wait and see mode seemingly more focused on the trade talk front, while market makers remain quite wary of quick risk on reversal on the deal more likely than not narrative.