NEW YORK, N.Y. – World markets remain quiet as traders wait for the US and China to sign the first phase of their trade agreement. However, comments that the tariffs on China will continue has caused stocks in Southeast Asia to fall.
European stock markets opened flat on Wednesday as investors wait for more information about the US-China trade deal. But wariness over the details of the proposed agreement and tariff comments made by US Treasury Secretary Steven Mnuchin has caused global markets to drop.
The US and China are scheduled to sign a “Phase One” agreement on January 15. Details about the new deal is being kept under wraps. However, China will reportedly purchase more American products under this new deal.
News that the tariffs on Chinese goods will still be enacted until Phase Two commences has quickly soured market sentiment. A Bloomberg report also claimed that the removal of those tariffs will depend on China complying with the Phase One deal.
Mnuchin’s comments came hours before the trade signing and saw share prices immediately pulling back. Wall Street had a weak close on Tuesday while the Pan-European STOXX 600 dropped 0.1%.
US Treasury yield also went down, with the 10-year note yield sliding down 1.7930%. Germany’s 10-year yields dropped two basis points after reaching two-week highs. But which direction they’ll go will depend on the country’s growth figures.
Asian markets were quick to pull back. Japan’s Nikkei 225 dropped 0.4% while the Hang Seng Index of Hong Kong went down 0.8%. China’s Shanghai Composite and the Shenzhen Composite declined 0.7% and 0.6% respectively. The KOSPI of South Korea also went down by 0.4%. Shares in Indonesia, Malaysia, Singapore, and Taiwan also went down.
Australia went the other direction though, as its S&P/ASX 200 rose 0.4%.
Traders in the region were not surprised by the decline. The trade deal signing is seen as a step forward and a de-escalation of the tensions between the two powerful countries. However, the decline in hostilities is expected to be minimal, and the issues plaguing the two will remain and will take years of discussions and negotiations.
For instance, Huawei Technologies remain a key issue. It was reported earlier that the US is looking to impose stricter regulations on China’s telecommunications giant. There are even calls from Congress to subsidize American companies to enable them to compete against Huawei and other Chinese tech firms.
Global markets are also waiting for the reports on company earnings that are scheduled to be released this week as well.