E-minis are up by about 0.4% so far today
That's helping to alleviate some of the pain felt by risk assets overnight i.e. tech stocks, equities in general, oil, commodity currencies. However, it's hard to see this turn into any major rebound especially in the equities space.
At the start of October, the S&P 500 was up by about 10% on the year. Fast forward to today, the index is now down by just over 1%. It's been a painful two months for equities in general and the likelihood of any year-end rally to salvage that doesn't look promising.
While equities may see some reprieve on the back of dip buying, it's hard for equity investors to feel comfortable to stick with that strategy after the recent worries over the last month. We have Italy and Brexit worries in Europe and the latest forecasts about global growth next year doesn't suggest that the overall landscape is bright and rosy.
But the real issue will be the continued trade spat between US and China. And we won't have to wait long before realising that things between the two powerhouses are set to only get worse before they get better.
Trump and Xi are to meet at the end of the month at the G-20 summit and the focus of their meeting will definitely be on trade. Or at least that's what markets will want to be focusing on, as to whether or not there is any progress to be had.
It's going to take a major - and at this point, unlikely - breakthrough for trade talks to suddenly turn the corner and progress for the better and I reckon there is no way that we'll see a significant outcome materialise from talks between Trump and Xi.
We may get the usual 'Trump blowing his own horn' saying that trade talks went well etc, but let's face the truth, they're not going to let up that easily against China and further tariffs are likely to come. On China's part, they're not going to submit to Trump's demands as that would be a dicey path to start treading on.
In short, equities could see some relief into the year-end but don't expect any major rallies. If anything, further setback looks more likely at this point and that doesn't bode well for risk sentiment in general as we close out the year.
