US-China trade, Apple, the Fed in focus

Investors are watching out for developments on the U.S.-China trade front, with high level negotiations set to begin later stateside.

“Today could be a crucial day for financial markets with the US-China trade discussions set to open in Washington and then the FOMC delivering it’s latest rate announcement and statement.” Rakuten Securities Australia said in a note.

“Investors are hoping for a positive outcome from the talks and Steven Mnuchin lifted some players hopes by declaring that ‘Everything is on the table’ and that the US could lift tariffs on China, however once again the market will be looking for solid progress before a real rally can take place,” the note said.

Chinese Vice Premier Liu He is set to meet U.S. officials on Wednesday and Thursday, hot on the heels of Washington leveling sweeping charges against Beijing’s telecommunications giant Huawei.

Market participants fear the jolt to Huawei could undermine the chances of the world’s two largest economies reaching a comprehensive trade deal.

White House economic advisor Larry Kudlow said Tuesday, however, that President Donald Trump is “moderately optimistic” about China and the U.S. striking a deal before a March 1 deadline.

Ahead of the start of negotiations, Apple CEO Tim Cook told CNBC on Tuesday: “There is a bit more optimism in the air in January, or certainly I feel that anyways.”

Cook’s comments came after the tech behemoth reported earnings which were largely in line with expectations.

Meanwhile, the U.S. Federal Reserve is set to announce its monetary policy decision following a two day meeting of the Federal Open Market Committee. Market expectations for a rate hike being announced Wednesday afternoon stateside are close to zero, according to the CME Group’s FedWatch tool.

ANZ Research’s Richard Yetsenga said in a morning note: “It is clear that there is a long road ahead to achieving meaningful progress between the two countries and while steps forward are possible, this week is unlikely to bring the certainty markets are looking for.”

“Trade uncertainty is playing a role in the Fed’s decision to pause interest rate rises for the moment. We expect the Fed to confirm an interim pause at its meeting tomorrow,” he added.

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