Itain'tovertillitsover

“It ain’t over till the fat lady sings” goes a famous proverb, which essentially means that we should not be quick to judge the end or be confident about the final outcome. So when the markets reacted to the comments by the Trump administration’s trade advisor, Peter Navarro, that the deal with China is “over”, they briefly forgot about the proverbial fat lady. US stock futures went down, US bond yields started dropping as the risk off sentiment gained ground. But soon the retraction came in. Navarro said in a later interview that his words were taken out of context and what he was actually referring to was “trust” not “trade deal” being over.

It would be apt to remember that during the trade deal discussions last year, Navarro was considered the hawkish voice of the White House on China. During the negotiation phase he had issued multiple statements to such effect. At that time his perennial outbursts were seen as a tactical negotiation strategy from the US, firstly to extract maximum ground from the other side and secondly to judge the reactions of public and markets to a potential breakdown eventuality of the deal.

But the swiftness with which the US President took to Twitter proclaiming that “The China trade deal is fully intact” suggests that this time it is different and not exactly a trial balloon. As the clarification has come straight from the top it assumes greater significance and supports the risk on mood. Asian stock markets, like the Hang Seng and the Nikkei are up close to 1%. Dow futures have also recovered the losses. Indian stocks have also opened in positive. The Indian rupee is trading up around 75.84 against yesterday’s close of 76.02.

On the domestic side, the bench mark 10 year trades weak at 5.89 currently. The FPI flows for the month have been net positive as close to 21K Crore INR have moved into Indian equities. The debt market on the other hand has seen an outflow of 3400 Cr for the month.