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Have We Gone Too Far ?

03 December 2018 by lberuti

The expectations for the G-20 summit held over the week-end were muted, with a balance of risk tilted to the downside. After “highly successful” discussions - according to the Americans -, the US agreed to delay for 90 days the implementation of additional tariffs on $200bln of imports from China. In return, China promised to use the time to make progress on relaxing non-tariff barrier, fighting intellectual property theft and reducing bilateral trade surplus. The credit market reacted positively, and indices traded aggressively tighter across the board during the first exchanges. But as the morning wore on, profit takers emerged and in the afternoon most of the business consisted in clients derisking their portfolio. Volumes were light on cash products, which is usually not a very positive sign regarding the strength of the rally. Nevertheless, credit indices managed to close tighter across all geographies and all rating classes. That might be enough to give some investors the nerves to attempt a long risk bet, during a week that will be shortened on some products which will not trade on Wednesday in tribute to the late George Bush.