Positive Sentiment On Trade War Sees Some Tech Companies Taking Risks

While the United States and China are slated to meet to discuss trade next month, a trade deal between the two largest economies that could bring an end to the trade war between them is still afar fetched reality.

However investors now find an opening because of the easing of tensions and no further escalation of the trade war for the time being.

While China waivered import tariffs on some US products on Wednesday, the frist such relaxation by Beijing in the trade war, the US president Donald Trump has also deferred by two week an impending increase in tariffs on Chinese goods.

It is expected that trade representatives of both the countries would meet face to face on September 17 in Washington.

These couple of announcements has provided some encouragement for those investors who had recently unwound positions in safe haven assets such as the yen. The currency had hit this year’s high in August but have since dropped beck to July levels.

Over the past week, there has also been a drop in gold prices even as there has been a rise in the US Treasury yields because of selling of bonds by investors. Earlier this month, the benchmark 10-year note yield touched 1.72 per cent from 1.46 per cent.

And it is not likely that there would be a quick improvement in business sentiment. According to a recent survey conducted by UBS, only about 13 per cent of businesses signaled that they would be increasing hiring of people even if there is a continuation of the trade tensions for the next sixth months. There has been a negative impact on both the US and global economies because of the trade war, believes almost 70 per cent of the respondents while the Trump administration’s approach was supported by 55 per cent of the businesses.

And even though the US administrations claims that it has gained while China has been hit by the trade war, the reality is that both the US and Chinese economies have been hit by the tit-for-tat tariffs.

US economists are keeping a close watch on whether a slowdown in the manufacturing sector would have an impact on the services sector and consumer spending of the economy – both of which so far have stood up to the pressure. In China, there are increasing calls for fresh stimulus efforts following a drop in exports in August and a worst decline for corporate profitability which is an important measure for the economy.

The trade war has now benefited Europe with the public listing of the South African media company Naspers that was an early investor in the Chinese tech giant Tencent. The company had spun a 31 per cent state in the Chinese tech giant and listed a new company in Amsterdam called Prosus. It is now the largest publicly listed consumer tech company in Europe and the second largest tech company in the region, after Germany’s SAP.

Investors have welcomed this move which is reflected in the increase of more than 25 per cent of the price in early trading after listing on Wednesday.

And Apple sprang up a surprise at its launch of new iPhone event on Tuesday with a pricing of Apple TV+ at just $4.99 per month which analysts feel would dramatically undercut the customer base of the other video streaming companies. There was a drop of 2 per cent in shares of Netflix and Disney. Apple’s streaming services are slated ot begin from November 1.

The price announcement by Apple for its streaming services was described as a “show stopper” and a “major shot across the bow” by Wedbush analyst Dan Ives.

(Adapted from CNN.com)

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