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According to Robert Carnell – Chief Economist Head of Research, Asia-Pacific at ING – the recent optimism in some form of US-China trade deal, even a limited one, seems to be dimming and in some ways, this isn’t surprising.

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The timing of the US travel bans and company blacklists associated with human rights issues have not helped to maintain a positive backdrop to these trade negotiations. They also look likely to provoke some retaliation from China, just a day before Vice Premier Liu He is due to arrive in Washington for trade talks.
 
While the US may insist that the two issues, trade, and human rights are separate issues, and indeed it is hard to argue against such a view, timing is everything. The latest developments cannot be reconciled as helping the prospects of a trade deal – no matter how limited in scope. Asian equity futures look fairly negative across the board today following a 1.56% fall in the S&P500 last night. US 10Y Treasury bond yields are heading lower again, and now only 1.53%, whilst the 2Y yield has taken a boost from the QE/not QE announcement and dropped to 1.419%.
 
A disappointing outcome to these trade talks would set up US Treasury yields to break past their September low of 1.4573%.