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US-China trade deal signed: Companies may still remain cautious about global trade, says Geoshpere Capital

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Businesses are not ready to jump back into any kind of a trade; global trade is on a back foot and I don’t think this trade deal changes a long-term perspective of companies in terms of being more cautious about global trade, said Arvind Sanger of Geosphere Capital Management.

The United States and China signed an initial trade deal on Wednesday that will roll back some tariffs and boost Chinese purchases of US products, defusing an 18-month row between the world’s two largest economies but leaving a number of sore spots unresolved.
Arvind Sanger, Managing Partner of Geosphere Capital Management the deal being signed was no big surprise. “The trade deal has been well telegraphed and if one looked at S&P 500, it was up less than 20 basis points. Therefore, I don’t think the trade deal was a big catalyst in the short-term because the markets have already run in anticipation that this deal was a done deal," he added.
“However, if you are taking a medium-term view the stock market is not inexpensive but interest rates are low and with this deal uncertainty somewhat out of the way, there is some running room here for markets to remain buoyant,” he said in an interview with CNBC-TV18.
Speaking further about the trade deal, he said, “The real challenge is going to be with the election looming and vastly different kind of approaches between the Republicans and Democrats, I do not think the market is going to run away with that uncertainty and the China trade deal will help, but businesses are not ready to jump back into any kind of a trade; global trade is on a back foot and I don’t think this trade deal changes a long-term perspective of companies in terms of being more cautious about global trade.”
Meanwhile, Priya Misra, MD & Global Head of Rates Strategy at TD Securities, "There has been ebbing away of downside risk. We are not as concerned about global slowdown but from now on it gets harder. Our view is that emerging market growth, global growth might outperform but my biggest fear is that the US is about to slowdown and we are already seeing signs, business investment is weak. I don’t think this trade deal does anything for business investment and there are elections now in the US.”
“So, if the US consumer begins to slow down then you do see impact across the rest of emerging markets. I do think India particularly can outperform given all the policy stimulus that has come in, but I don’t think we are entirely out of the woods when it comes to the impact of profit margins slowing on the broader economy,” she added.
When asked if he had a big budget trade, Sanger said, “I like domestic demand, so I don’t have a specific sector that I can point to that I am counting for any magic from the budget. I am just hoping that the government will continue to do enough from stimulus standpoint and one of the things we can hope for is some tax relief for consumers, which could help some of the consumption related companies. However, consumer stocks are not cheap so we are trying to find indirect ways to benefit from consumption story and one of the areas that could benefit is auto, auto parts although some of those stocks have moved. In general we do not have a big budget specific trade other than counting on more help for domestic demand.”
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