Market Snapshot – Eyes on Trump Xi Meeting, Global Stocks Lower after Fed Minutes

Donald Trump and Xi Jinping Meeting in Focus

Markets attention shifts to Xi-Trump meeting through the U.S session, with not just the currency markets at the mercy of the meetings ahead, the broader markets likely to be on tender hooks over the next 2-days as the fear of a possible trade war or worse likely to weigh on market risk appetite.

The two most powerful leaders will meet at Trump’s retreat in Florida to discuss global trade including the US-China trade, currencies and following the latest tension with North Korea, the US president will probably mention this issue.

Global Stocks Mostly Lower

European stock markets are mostly down, following on from broad losses in Asia, as investors digest yesterday’s FOMC minutes, which showed that the Fed discussed scaling back its balance sheet later in the year.

The Nikkei closed with a 1.40% loss, ASX and Hang Seng also declined and in Europe the FTSE 100 is down nearly -0.50% and the DAX down a similar amount. Eurozone markets managed to claw back some losses and CAC 40 and the Spanish IBEX are slightly higher

Fed Spooked the Markets

Yesterday, the Fed triggered a massive reversal in the U.S. equity markets when the minutes from its Federal Open Market Committee meeting on March 15 showed the central bank wanted to start unwinding its huge $4.5 trillion balance sheet later this year.

The minutes also showed “some participants viewed equity prices as quite high relative to standard valuation measures.” The comment was interpreted by markets that the FOMC admits Stocks market is a bubble.

Draghi Remains Dovish

ECB President Mario Draghi said early morning that he Sees no evidence to materially alter inflation outlook and sees no urgency to take further measures with reassessment of monetary policy statement not warranted. The conclusion of Draghi’s statement is that the ECB has no need to deviate from wording of forward guidance, which means the central bank will continue its stimulus program at least until the end of the year.

The EUR/USD trades steady on Thursday at 1.0665,+0.01%.

Investors Concern over Trump Administration’s Ability to Deliver Promised Tax Reform

Investors were also spooked by worries about the Trump administration’s ability to deliver promised tax reform. Concerns increased after comments from lawmakers about the deep divisions in Washington. U.S. House of Representatives Speaker Paul Ryan probably contributed to the selling pressure after he said tax reform will take longer to accomplish than healthcare.

Gold is trading slightly higher on Thursday at $1254.20, +0.45%.