Summary:

  • Trump chooses less severe plan for Chinese tech investments
  • Mnuchin expecting a “big” GDP number; mixed US data
  • Stock indices bounce sharply higher; Does a recovery lie ahead?

 Two positive developments not far apart have caused a fairly sharp bounce in stock indices with the DE30 jumping 200 points off its lows while the US500 moved up near to its highest level of the week. First off, some comments from Trump relating to trade have seemingly shown a little softer approach with the president deciding to use less stringent methods to curb Chinese investments in US-based technology companies.

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 The US500 has jumped over 20 handles in the last couple of hours no the news and is now not far from prior resistance around the top of the H1 Ichimoku cloud. Source: xStation

The details of the plan to crack down on this include the expanded use of the Committee Foreign Investment in the United States (CFIUS) but overall they were weaker than expected and perhaps provides a glimmer of light that the rising trade tensions may be set to halt their recent gains. 

Not long afterwards, US Treasury Secretary Steve Mnuchin gave an interview on CNBC where he was decidedly upbeat. Mnuchin made the following comments during the appearance:

  • US is not singling out China in investment restrictions
  • No significant economic impact to arise from the decision
  • Expects a “big” Q2 GDP number

The GDP figure that Mnuchin was referring to is released tomorrow afternoon at 1:30 with an annualised Q/Q reading of 2.2% expected – inline with the previous reading. Looking at today’s data the focus is on durable goods, with the headline number showing a smaller contraction than expected (-0.6% M/M vs -1.0% M/M) but the core reading missed forecasts (-0.3% M/M vs 0.5% exp). There was a particularly noteworthy revision to the prior reading which now stands at 1.9% compared to 0.9% beforehand and this makes the latest print appear far more favourably. 

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 Both durable goods orders and the core showed a decline in the most recent release. Source: XTB Macrobond