US markets reached new all time-highs again yesterday on all 3 major indices, closing just below the new record levels. This seemed very unlikely a week ago after US-Iran tensions seemed to have reached a boiling point.
Last week Wednesday Iran launched several ballistic missiles towards US military bases in Iraq. People of Iran demanded retaliation after Iranian General Qasem Soleimani was assassinated with a US drone strike on Friday, the 3rd of January. There was a lot of pressure on Iran’s leadership as Soleimani was a highly regarded hero locally and they can’t be seen as giving in to the US. Iran seemed to have threaded the needle perfectly however with taking a tough stance publicly towards the US, but also not escalating already-heightened tensions between the US and themselves.
Just after the threat of a World War 3 blew over, Iran admitted to mistakenly shooting down a Ukrainian passenger jet that was leaving Tehran’s airport that same Wednesday. 176 people were killed and the anger in Iran now turned towards their own leaders and military officials with protesters demanding that the supreme leader step down and those responsible be prosecuted. The unrest in Iran looks set to continue for quite a while.
After all this chaos, the focus in the markets have started to shift towards the signing of the Phase 1 trade deal between the US and China that is scheduled to take place tonight. Trump has said that he thinks the deal will be signed on the 15th, or shortly thereafter…which is interesting wording to say the least. The US also stated last night that the tariffs on China will remain until after the 2020 US elections. There are still some sticking points and terms that have to be agreed on, so let’s see if the phase 1 agreement is actually signed tonight. The Chinese negotiating team, led by Vice-Premier Liu He, arrived in the US on Monday.
What to look out for the rest of the week
The signing of the phase 1 US-China trade deal is scheduled to take place tonight.
On Thursday, the ECB are publishing the account of their monetary policy meeting which will be followed later in the day with a speech by ECB President Lagarde.
China’s Q4 GDP data will be released on Friday, as well as their Industrial production figures for December.