Navarro Lands In Hot Water
US stock markets saw plenty of volatility over the last 24 hours amidst confusion pertaining to comments made by the White house trade adviser, Pete Navarro. Speaking with reporters on Monday, Navarro appeared to suggest that the US/China trade deal was dead in the water, saying: “it’s over… “Here’s, I think, the turning point,” he explained. “They came here on January 15th to sign that trade deal, and that was a full two months after they knew the virus was out and about.
“It was a time when they had already sent hundreds of thousands of people to this country to spread that virus, and it was just minutes after wheels up when that plane (referring to Chinese negotiators) took off that we began to hear about this pandemic.”
Markets tumbled in response to Navarro’s comments with the DOW shedding 400 points as investors reacted with shock. Speculation has been building for months about the potential for a collapse in the US/China trade deal amidst the tensions which have flared up around the COVID-19 outbreak, and with Navarro seeming to confirm these suspicions, selling kicked in.
However, in a statement issued later in the day on Monday, Navarro attempted to back-pedal on these comments, saying: My comments have been taken wildly out of context. They had nothing at all to do with the Phase I trade deal, which continues in place. I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world.”
Trump Steps In
With markets clearly roiled by the confusion, Trump sought to add clarity. Writing on Twitter, the President said: “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!”.
Markets have since recovered the losses suffered during the incident though downside risks are building. Tensions between the US and China have deteriorated drastically over the course of the pandemic with Trump accusing China over its role in the outbreak, including threats to apply financial penalties against China. However, China has so far deflected these threats and no follow through has been seen. With Chinese & Indian troops involved in fatal clashes last week, however, and with the US still highly concerned over China’s continued militarisation of the South China Sea, the prospect of the trade talks collapsing remains very real.
DOW (Bullish above 24660 )
From a technical viewpoint. The failure above the 27094 level saw price reverse an test the monthly/yearly pivot around 24660 which is holding as support for now. While above here, near term bias remain bullish. However, price is at risk of putting in a lower high here and if the support level are broken, a larger reversal could develop.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.