U.S. – China Tensions Put Pressure On Markets

U.S. – China Tensions Are Back Into Spotlight

According to a Reuters report, U.S. is ready to impose sanctions on multiple Chinese officials over their role in recent events in Hong Kong. Both Hong Kong and mainland China officials are believed to be targeted by new sanctions.

In recent months, U.S. – China relations have been out of headlines as investors focused on U.S. presidential elections and coronavirus. If the U.S. imposes additional sanctions on Chinese officials before Biden takes office, his options on stabilizing relations with the world’s second economy will be even more limited.

Not surprisingly, S&P 500 futures are losing ground in premarket trading. The continued deterioration of U.S. – China relations is bad for the world economy,  especially at a time when the world struggles to contain the second wave of the virus.

At the same, the negative impact from new sanctions may be limited as vaccine optimism continues to support markets.

Stimulus Negotiations Will Continue This Week

The recent $908 billion proposal from a bipartisan group of lawmakers is gaining steam and will be discussed by Republicans and Democrats this week.

The Non Farm Payrolls report, which was published on Friday, was worse than expected and indicated that the job market started to feel the pressure from the second wave of the virus. In this light, U.S. lawmakers feel the urge to craft a new coronavirus aid package as soon as possible.

Interestingly, the market is not very optimistic after months of waiting for a new relief bill, and it looks like traders will wait for additional positive news on the stimulus front before pushing stocks to new highs.

Brexit Talks Stall

British newspaper The Sun has recently reported that UK Prime Minister Boris Johnson was ready to leave Brexit talks in case EU did not provide additional concessions.

The report put serious pressure on GBP/USD and hurt global market sentiment. Time is running out for negotiators to reach a deal while UK and EU are not moving closer to a compromise.

A no-deal Brexit could send shockwaves across markets so traders will have to pay close attention to news from Britain in the upcoming trading sessions.

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