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Indices a mixed bag ahead of phase one trade deal details

By Hugh Wilson

With the US and China having signed a phase one trade deal on Wednesday, investors kept an eye out for devilish details

Major US indices were all in the green in early trading Wednesday as investors anticipated the long awaited signing of a US-China phase one trade deal.

The Dow Jones was the biggest winner, rising 100 points, or 0.35 per cent, by 10am EST. The Nasdaq also had trade wind in its sails, posting gains of 0.38 per cent at the same time.

There was a more muted reaction in Europe, where the UK’s FTSE 100 traded flat ending at 7642.80, 0.27 per cent up and the German Dax ended the day down 24.14 points and 0.18 per cent.

Traders in both countries were reacting to disappointing domestic news. In the UK, inflation fell to a three-year low, raising the chances of an imminent interest rate cut. The pound fell against the dollar in the wake of the announcement.

To add to the gloom, Germany published data showing economic growth in 2019 at 0.6 per cent, its slowest in six years, though this was largely in line with analyst expectations.

The imminent prospect of a US-China trade deal didn’t raise much of a cheer in Asia either, with both Hong Kong’s Hang Seng and Japan’s Nikkei trading down. The indices had slid 0.39 per cent and 0.45 per cent respectively by market close.

While the trade deal dominated the news cycle, its immediate economic effects may already have been priced in by markets, with skeptical traders on the lookout for devils in the detail. The Trump administration had announced on Tuesday that existing tariffs on Chinese goods would stay in place despite the apparent detente, dampening investor optimism.

Doubts about the strength of the deal helped gold climb by 0.39 per cent by 15.30pm GMT. After falling in morning trading, Bitcoin rallied again in the afternoon, trading at around $8,779 and continuing January’s crypto surge. Both gold and Bitcoin may have benefitted from skittish traders seeking safer havens.

FURTHER READING: Bitcoin surge slows after best start to a year since 2012

FURTHER READING: US-China phase one trade agreement signed in Washington

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