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Citi Says A G20 Summit Will Not Necessarily Bring End To Trade War

Citi Says A G20 Summit Will Not Necessarily Bring End To Trade War
According to the view point of Citibank's Asia Pacific regional head of investments, strategic dominance instead of trade is more the core issue in the every escalating trade tensions between the two largest economies of the world the United States and China.
"It's not something that's likely to go away just because of the meeting that's going to happen on Saturday," said Shrikant Bhat, Citibank's regional head of investments for Asia Pacific and Europe, Middle East and Africa.
He said this in reference to the much hyped and anticipated meeting between United States President Donald Trump and the Chinese president Xi Jinping on the sidelines of the G20 summit to be held in the Argentine capital of Buenos Aires.
However, it would be a welcome move for the international financial markets if there is any sign that the two parties could reconcile their differences on trade and other related things such as a postponement of the proposed increase of US tariffs on Chinese goods starting from January next year.
There was a rise in the Asian market on Thursday and almost stocks traded on the higher mark because of expectations of some positive outcomes from the crucial meeting between the two leaders. The markets and investors hope that the two leaders could reduce some of the trade tensions that currently exist between the two countries. 
On the other hand, there was rallying in the U.S., equity markets and there was a sell off in bonds which was triggered by some remarks by the US Federal Reserve Chairman Jerome Powell on Wednesday when he said that according to him the benchmark interest rates as fixed by the central banker is close to the targeted neutral level of the fed.
"Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth," Powell said during a speech at The Economic Club of New York.
There was a section of investors who concluded that the comments made by the Fed chairman were clear indications that the central bank of the country would stop or reign in on its policy of hiking of interest rates much sooner than the market has been expecting and as had been signalled by the central bank.
"There is definitely tailwinds here for the markets if this continues," said Bhat, referring to the Fed's indication of policy normalization.
But according to Bhat, through his comments, Powell has left plenty of space open for the Fed to raise rates further because he said that move would be dependent on the performance of the economy and that the Fed was neither committed to increasing or reducing interest rates,. The Fed chairman "has kept the door open for a couple more hikes — that's not off the table as yet," Bhat said.

Christopher J. Mitchell

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