And now, all eyes will turn to the latest round of trade talks in Washington which, presumably, will look a lot like the last half-dozen rounds of negotiations between Bob Lighthizer, Steve Mnuchin and Chinese Vice Premier Liu He, who all met in Beijing last week for what was described as (another) “constructive” dialogue.

Global equities took their cues on Wednesday from a Financial Times article which suggested that while the US and China are still at odds over whether existing tariffs will be lifted as part of any deal and on how exactly enforcement will work (part of the US “strategy” appears to revolve around keeping some tariffs in place as “leverage” to ensure compliance), most other “major issues” have been resolved.

Does that tell us anything new? Well, not really, although to be fair, it does suggest that the old “sticking points” (e.g., forced tech transfer, IP theft, state subsidies in China, etc.) have been replaced by procedural hurdles tied to existing levies and the mechanics of a compliance regime. Or something. Who knows, but what we do know is that “foaming at the mouth” risk assets will take it as just another excuse to extend the YTD surge. An upbeat read on Caixin services (54.4 versus consensus 52.3) certainly helps. That’s the best reading since January 2018 and it builds on the official and Caixin manufacturing PMIs which sparked Monday’s rally.

“Four events have set the scene for markets today. UK PM May’s rejection of a ‘no deal’ Brexit and her proposal of cross-party talks, strong Caixin services PMI data in China, strong retail sales in Australia and a further move higher in oil prices”, SocGen’s Kit Juckes wrote Wednesday morning.

Onshore and Hong Kong shares extended this week’s rally, bringing gains for Q2 (which is obviously in its infancy) to ~3%.


If authorities in Beijing are keen on cooling things off, it isn’t working. Bloomberg reported over the weekend that Chinese brokerages are downgrading mainland shares at the fastest clip for any March since 2011, a clear sign that officials are concerned. You’ll recall that last month, a rare sell rating on PICC was enough to spark a nasty selloff, but FOMO is apparently getting the best of China’s notoriously difficult-to-control retail investor base.

“The 32% YTD A-share rally has led to concerns among some investors on upside sustainability and speculative length in the market”, Goldman wrote Tuesday, adding that for their part, they “think the surge has been mainly driven by fundamental justifications, and roughly 10pp of the gains could be attributable to the recent improvements in retail sentiment.” I see.

Meanwhile, in Europe, 10-year bund yields turned positive (“Make Europe not Japan again!“) as European risk appetite was buoyed by ostensible “progress” on Brexit (May’s olive branch to Corbyn) and solid services PMIs. The trade-sensitive DAX is up 3% this week.


In another sign of the times, Italian equities have entered a bull market despite (and perhaps because of, considering League’s rising popularity at the expense of Five Star) ongoing political tumult. And the VStoxx is now languishing back near its pre-October lows.


Long story short, this is FOMO at its finest.

In fact, it’s starting to have that “melt-up” feel to it and considering the extent to which the Q1 rally was a “flow-less” affair lacking participation by key investor groups who would presumably be “forced”/”dragged” in on any sustained move higher, it could get more frothy still.

Just ask noted cross-asset strategist David Dennison…

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