The West of the World Versus China and What this Means for the Markets

The markets were largely nervous on Friday, ahead of Trump’s speech on China, following the Chinese government implementing security legislation on Hong Kong.

President Donald Trump announced on Friday he and his administration were to start commencing with the process of eliminating special treatment for Hong Kong. He said:

We will take action to revoke Hong Kong’s preferential treatment. The United States would also impose sanctions on individuals seen as responsible for smothering Hong Kong’s autonomy.

Secretary of State Mike Pompeo added that the territory no longer warrants special treatment under U.S. law which has enabled it to remain a global financial centre.

What does this mean for markets?

It was not as bad as it could have been, markets were fearing the worst, that Trump potentially cancels the phase one deal with China. Should he have done this, it would have sparked much safe-haven flow, risk-off trading. However, given that he didn’t mention it, US stocks rallied towards the close, riskier FX further propped up ground versus the USD.

Outside of the U.S. and China situation, there are also renewed tensions between the EU and China, as well as the UK and China. These will all be market moving themes to be aware of over the coming weeks.



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