US-China Talks and Brexit: Two Big ‘Ifs’ for Markets



US-China talks

In the previous part, we discussed that the US (QQQ) and China plan to resume the trade talks next week. So far, China’s economic data have disappointed the markets. While there have been some positives in fixed-asset investments due to higher spending from the Chinese government, the export sector has been weak amid the trade war with the US.

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Businesses have also been shying away from big-ticket investments amid uncertainty about US-China trade relations. A complete breakdown of the US-China trade talks could be catastrophic for the markets. The rally this year has been partially due to optimism about a possible deal between the two sides.

Along with the US-China trade talks, Brexit has brought more uncertainty for markets. British Prime Minister Theresa May has written to the European Union (VEU) for a three-month extension. The European Union is willing to grant the United Kingdom one extension with the condition that “Any extension offered to the United Kingdom should either last until 23 May 2019 or should be significantly longer and require European elections.”

Like the US-China talks, Brexit is full of uncertainty for the markets. Currently, the markets aren’t really pricing in a no-deal Brexit or a breakdown in the US-China talks. Looking at stocks, General Electric (GE), IBM (IBM), NVIDIA (NVDA), Advanced Micro Devices (AMD), Micron (MU), and Alibaba (BABA) are trading with losses of 0.05%, 0.55%, 0.55%, 1.9%, 0.42%, and 1.3%, respectively, as of 11:40 AM EST on March 20.


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