U.S. Stocks Mixed As Traders Evaluate The Recent Increase In U.S. – China Tensions

Coronavirus Aid Package Negotiations Are Set To Continue

U.S. Republicans and Democrats failed to reach consensus on the new coronavirus aid package over the weekend, and U.S. President Donald Trump decided to use executive orders to extend benefits and stop evictions in absence of a comprehensive deal.

The new unemployment benefits will decrease from $600 per week to $400 per week, supporting the laid off workers but also providing them with an incentive to get back to work.

Meanwhile, Treasury Secretary Steven Mnuchin and U.S. House Speaker Nancy Pelosi have signaled that the parties were ready to re-start talks in order to find a solution for longer-term support of the U.S. economy.

There is little doubt that U.S. needs a comprehensive aid package as Unemployment Rate remains above 10% while Personal Spending may decline in case U.S. workers do not receive additional support.

China Sanctions U.S. Officials

China has imposed sanctions on eleven U.S. citizens including Senators Marco Rubio and Ted Cruz in retailiation for sanctions on Chinese officials related to the new security law in China.

Interestingly, China has recently arrested a Hong Kong media tycoon who supported the pro-democracy opposition. This arrest may trigger another round of tensions between U.S. and China.

So far, the market has mostly ignored the increasing U.S. – China tensions. It looks like traders believe that the first phase of the trade deal between U.S. and China is safe until U.S. elections in November while it’s too early to position portfolios for post-election period.

Positive Data From China Supports Stocks

China has recently released its producer prices index for July, which indicated that producer prices declined by 2.4% on a year-over-year basis compared to analyst consensus which called for a decline of 2.5%.

In June, PPI was -3%, so there are signs that producer prices are improving, which signals that China’s manufacturing sector is rebounding after the hit dealt by the coronavirus pandemic.

Data from China is seen as a leading indicator for the rest of the world since the country has managed to contain the coronavirus pandemic earlier than other nations.

S&P 500 futures are mixed in premarket trading as they are already close to all-time highs and will likely require stronger catalysts to continue their upside move.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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