US & China Trade (Verbal) Blows

Tensions between the US and China were shown to still be at elevated levels this week as officials from the two leading economies traded blows at a top security summit taking place over the weekend. The annual Shangri-La Dialogue this year has been headlined by clashes between the two world leaders over tensions around Taiwan.

China Turns Down Meeting Request

Following China’s refusal of the US request for a bi-lateral meeting between the two countries’ defence ministers, the US Indo-Pacific command reported that a Chinese warship passed a US ship by around just 150 metres in the Taiwan Strait on Saturday. This marks the latest of several incidents where US and Chinese military carriers have avoided narrow misses and serves as a reminder for the potential for conflict between the two.

The US issued a statement criticising China for not engaging in dialogue, citing the need to keep communication lines open so as to avoid conflict. China, in turn, responded by accusing the US of lacking sincerity in its attempts at communication and warned that a conflict between the two would be a catastrophe for the world.

Risk Sentiment Weaker

Stocks and commodities have started the week a little softer against this backdrop, with the US Dollar seeing a decent safe-haven bid. Any further discourse between the two is likely to be a key driver of risk sentiment this week.

Technical Views

Nasdaq

For now, the index continues to push higher within the bull channel which has framed the rally off the YTD lows. Price has recently broken above the 14288.2 level and, while above here, the focus is on a continuation higher towards the 15177.5 March 2022 highs. To the downside, a break back below this level will see 13752.6 come into view as next support.