Global trade tensions have captivated financial markets this year with Trump’s escalating trade war with China bruising global sentiment and investor confidence.

The tit-for-tat tariffs between both nations have rumbled on for months on end, fuelling fears of an all-out trade war becoming reality. With Washington already planning to increase tariffs from 10% to 25% from January 1st, the US-China trade dispute is reaching a very dangerous tipping point. A trade war between the two largest economies in the world represents a major threat to global economic growth and based on this, there are no winners. The G20 summit in Argentina will be of significant importance as US President Trump and Chinese counterpart President Xi are expected to discuss trade.

It is fair to say that the market outlook for the rest of 2018 hangs on whether Trump and Xi are able to see eye to eye on trade. Although a breakthrough deal is deemed unlikely, any encouraging signs of co-operation or interest for further negotiations will be warmly welcomed by financial markets. Risk sentiment is seen making a return if Trump accepts China’s request to hold off a planned increase in tariffs. However, if talks descend into disagreements and tensions end up escalating, investors will most likely enter December adopting a risk-off approach as trade war fears heighten.

Whatever the outcome of the Trump-Xi talks, it most certainly will have a lasting impact on global sentiment.


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Commodity spotlight – Gold

The near-term outlook for Gold will be heavily influenced by how the Dollar reacts to trade talks between Trump and Xi during the G20 Summit.

A positive outcome to trade talks is seen weakening the Dollar amid improved risk sentiment, consequently offering Gold prices some support. Although Gold may also find support if negotiations prove unsuccessful, the gains are likely to be limited by the Dollar which remains a go-to currency in times of uncertainty. Technical traders will continue to closely observe how the precious metal behaves below the $1,228 resistance level. A failure for prices to break above this point is poised to result in a move back towards $1,218.

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