Since the end of September we have seen increasingly volatile markets, and this week doubts about the US/China trade deal had hit markets on Tuesday but with the US market closed on Wednesday futures had recovered a little.
The arrest in Canada of Huawei’s Chief Financial Officer on a request for extradition to the US on accusations of violating trade sanctions on Iran, was seen as souring US Chinese relations, harming the possibility of a trade deal. OPEC is meeting and comments from Saudi Arabia that no deal on production cuts had yet been agreed has also weighewd on the oil price. However the OPEC meeting continues and there are more positive signs from China on trade that are not being focused on.
Chinese Ministry of Commerce spokesman Gao Feng said “China will start from agricultural products, autos and energy to implement specific items that China and the US have agreed upon”.
When asked for specific comment on autos he said to look for an announcement from the State Council’s Tariff Committee. He also commented that The Chinese and American trade teams have good communication and have already reached a high level of consensus. He refused to comment on the arrest. This appears to confirm some of Trump’s optimism on reaching a deal with China.
We suspect that the falls in equities are being made worse by systematic trading. We continue to see value in equity markets particularly relative to bond yield. The UK with a prospective price earnings ratio of just 11 and a dividend yield of 4.8% looks attractive.
Whilst there is no guarantee we have seen the bottom of the market, based on current values relative to those earlier in the year, this recent volatility may be presenting an opportunity to put cash that has been on the sidelines to work.
If you have any questions, please speak to your IEP adviser.