The long-awaited “phase one” trade deal has finally been signed. After two turbulent years of trade disputes that have weighed on the global economy, investors got some relief on Wednesday with the US and China agreeing a pause in the trade war.

The main ingredient of the deal is a commitment by China to purchase an additional $200 billion worth of US products over the next two years. Out of the total additional purchases, 39% will be in manufactured goods, 27% in the energy sector and 19% in services. In return, the US will cancel planned tariffs on some consumer products and half the tariff rate from 15% to 7.5% on other goods. However, the 25% tariffs on $250 billion worth of Chinese industrial products will remain in place, as will China’s retaliatory tariffs of $100 billion on US goods. 

An enforcement mechanism has also been outlined in the 86-page agreement, but the next steps have been kept vague with no indications as to when we will see a “phase two” agreement.

Market reaction has been relatively subdued to the deal signing. Almost all details were already known to investors and priced into markets. Now investors will need to wait and see if the trade situation improves or levies will be re-imposed, but in the short term, attention will move to corporate earnings and economic data.

So far, more than 80% of US companies who have already reported have managed to beat the bottom line and if this trend continues we may see a positive quarter on a year-on-year basis as opposed to expectations of a 2% decline. This doesn’t necessarily mean stocks will go higher from current levels. The S&P 500 forward P/E ratio is currently standing at 18.4, and without further monetary or fiscal policy easing, it’s going to be difficult to justify a further rally in prices.

MyFxtops 邁投 (www.myfxtops.com) -Reliable Forex Copy Trade community, follow the master for free to trade!

Disclaimer: This article is reproduced from the Internet. If there is any infringement, please contact us to delete it immediately. In addition: This article only represents the personal opinion of the author and has nothing to do with Mato Finance The originality and the text and content stated in this article have not been confirmed by this site. The authenticity, completeness and timeliness of this article and all or part of the content and text are not guaranteed or promised. Please refer to it for reference only Verify the content yourself.

Copyright belongs to the author.
For commercial reprints, please contact the author for authorization. For non-commercial reprints, please indicate the source.