Is the Global Picture Brightening?

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Global stocks have been a hot mess all summer, but some recent events may suggest the tide is turning.

Over the weekend, for instance, China allowed its currency to appreciate against the U.S. dollar. That’s being viewed as a sign Beijing won’t deploy yuan devaluation as a weapon in its trade war against U.S. President Trump. (Remember it’s hard for China to play hardball with forex because that would oppose its own goal of building a global financial epicenter.)

Aside from calming nerves, today’s rally in the yuan is providing a direct boost to Chinese equities. It’s also helping to weaken the U.S. dollar, which in turn is good for European and emerging markets.

Speaking of emerging markets, Mexican Economy Minister Ildefonso Guajardo said his country is on the verge of signing a trade deal with Washington. Click here for more on our coverage of this story.

Speaking of trade, check out this morning’s comment from Germany’s Ifo Institute for Economic Research: “The truce in the trade conflict with the US contributed to improved business confidence.” They went on to cite “clearly more optimistic expectations of the surveyed companies, especially in the automotive industry,” and added “companies are increasingly planning to step up production.”

That helped lift Ifo’s sentiment more than expected to a six-month high of 103.8.

On the flip side, developments on the home front have been less bullish for the U.S. dollar. Last week, for instance, Federal Reserve President Jerome Powell gave a vapid address at Jackson Hole while minutes from the central bank’s last meeting suggested there may be only three rate hikes this year.

Housing and durable-goods numbers on Thursday and Friday were nothing to write home about, either.

Put all the facts together, and currencies are pretty much following the course mapped out in last Monday’s Market Action webinar. Did you miss it? Don’t worry, another one is coming half an hour after the closing bell today. Click here to register!

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.