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Abu Dhabi, UAESaturday 15 December 2018

As crucial US-China talks loom, Trump may be better placed

US economy appears to be strengthening while Chinese President Xi Jinping "is under pressure as China is reportedly slowing", says Sun Global chief

US President Donald Trump will meet China's President Xi Jinping on Friday on the sidelines of the G20 summit. AP
US President Donald Trump will meet China's President Xi Jinping on Friday on the sidelines of the G20 summit. AP

The chief executive of international financial services firm Sun Global Investments (SGI) said on Thursday that while a thawing of relations between the US and China may be at hand, US President Donald Trump will enter talks with his Chinese counterpart on the sidelines of the G20 meeting in Argentina "with a slight advantage".

“With one of the most important meetings in recent times between the US and China on Friday, markets are supported by a potential improvement in the relations between the two biggest economies, said Mihir Kapadia, CEO and founder of SGI.

"However, with the news the US GDP figures has increased, President Trump will go into talks with a slight advantage as he looks at getting the best deal for the country."

Mr Kapadia said that was because the US economy appears to be strengthening while Chinese President Xi Jinping "is under pressure as China is reportedly slowing".

"What will aid [Mr Xi] is news that the US trade deficit is at a record high and the fact that China is a major investor in US government Treasury Bonds."

Investors in commodity markets are looking ahead to the meeting of leaders of the G20, the world's biggest economies, on November 30 and December 1, with the US-China trade war at the top of the agenda.

Mr Trump is open to a trade deal with China but is also prepared to hike tariffs on imports from the country if there is no breakthrough on longstanding trade issues during a dinner on Saturday with Mr Xi, White House economic adviser Larry Kudlow said on Tuesday.

Mr Xi said China will widen market access for foreign investors and step up protection of intellectual property rights.

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The G20 meeting comes as global economic growth may be slowing more than expected, the IMF warned. Recent data suggest the situation has only worsened since the fund trimmed its world GDP forecast last month, according to a report prepared for the G20 summit.

“The next catalyst will be the G20 meeting between Trump and Xi; we believe risk assets will tactically trade in the green following a tariff cease-fire,” Eleanor Creagh, a strategist at Saxo Capital Markets in Sydney, told Bloomberg. But she added that “a tradeable risk bounce on a paper deal at G20 will be unlikely to reverse sentiment structurally as the underlying US-China relationship is still deteriorating.”

Oil prices ticked higher on Thursday on optimism that trade talks at the G20 meeting could aid the global economy and improve the demand outlook, while an increase in US crude inventories to their highest in a year curbed gains.

US crude futures rose 38 cents, or 0.8 per cent, to $50.67 per barrel by 03.38 GMT. The market ended the previous session down 2.5 percent at $50.29 a barrel, after hitting the lowest since early October last year.

International benchmark Brent crude rose 27 cents, or 0.5 per cent, to $59.03 a barrel, having dropped 2.4 per cent on Wednesday to $58.76 a barrel.

Both markets rose more than 1 per cent in early Asian trade.

"We have seen huge increases in supply and the demand picture is in question. However, we might see some movement on global trade issues at the G20 meeting which starts on Friday," Michael McCarthy, chief strategist at CMC Markets and Stockbroking, told AFP.

"I think we are seeing some positioning ahead of those potential demand-positive events."