US, China jawbone on trade, but markets aren’t taking the bait

Indices

In a remarkable show of restraint, markets have remained in the red despite positive noises on the prospect of reopening trade negotiations between Washington and Beijing.

US and Chinese officials are trying to sound positive on the odds their nations can reach an agreement on trade. It’s just the latest in a cycle of: sound positive > negotiate terms > back away from a deal > raise tariffs.

But this time around it seems markets are becoming wary of the rhetoric. Today, major indices are mostly in the red. Even the cautious optimism of yesterday’s early rise was quickly wiped out later in the New York session as traders thought twice about bidding up the major indices.

It could partly be exhaustion. The past month has seen the Dow gain or lose over 800 points in a single session on more than one occasion. 1,000 point swings are unusual, but not rare for the Hang Seng these days. Gold has seen movements in the region of 2%, while volatility for oil has produced swings of 5% in both directions.

The mystery phone call

On Monday, China’s top negotiator tried to calm fears ignited by Friday’s new tariff announcements. Vice Premier Liu He stated,

“We believe the trade war escalation is bad for China, bad for the United States and bad for the interest of the people in the world. We are willing to use a calm attitude to solve problems by negotiations and cooperation.”

Trump later claimed that “China called last night”, and strengthened the message by telling reporters at the G7 summit that “This is a very positive development for the world”. He later claimed “I think we’re going to make a deal”.

Asian markets trimmed losses and US and European stocks edged higher. But traders weren’t convinced.

Trump’s claim that there had been a phone conversation between officials from the US and China kept markets on the back foot. China’s Commerce Ministry declined to comment when asked by Reuters for confirmation that a call had taken place. While US Treasury Secretary Steven Mnuchin said the two sides had been in contact, editor of China’s state newspaper the Global Times, Hu Xijin, claimed that negotiators haven’t talked recently.

After being burned before, markets need something more concrete

It’s not that hard for an official to say that a trade war is bad and they don’t want one. Without confirmation of the key phone call, that’s all markets have to go on.

The major indices today are largely in the red, with the DAX heading towards a 1% loss and US futures pointing to a lower open. Traders clearly aren’t falling for the jawboning – if Trump or Beijing wants to calm market fears they’re going to have to offer up something a lot more solid.

As Trump-Xi prepare to meet, Beijing jabs at Washington

Indices

This G20 meeting might as well be the G2 this time around. The United States and China are the main topic, the two having hit economies across the globe with their trade dispute.

Markets have long been hoping that the gathering in Osaka might provide an opportunity for presidents Trump and Xi to meet and work through their differences. It was only a few days ago that state officials confirmed this was happening. Trump had previously dashed any hopes of a discussion.

But while Trump and Xi are preparing to meet to smooth things over, back in Beijing the rhetoric was still accusatory. Vice Commerce Minister Wang Shouwen stated that China wanted the US government to cease “inappropriate” actions against domestic companies.

Beijing hits back at US Commerce Department

On Friday the US Commerce Department blacklisted five Chinese companies from buying components made in the US. It already hit Huawei – the Chinese smartphone giant – which such a ban in May.
CNBC reported that Mr Wang, speaking in Mandarin, commented Monday that:

“We hope the US side, under the principles of free trade and the spirit of WTO principles, can cancel these inappropriate measures against Chinese companies, and remove them from the entity list. This has benefits for both sides.”

S&P 500 1-day chart, 15.15 BST, June 24th, 2019

Markets are currently holding their breath, but today’s response from China is a good reminder that nothing has changed until the two leaders agree a deal.

Dow Cash 1-day chart, 15.15 BST, June 24th, 2019

We’ve been much closer to expecting a resolution before – there was even a deadline – only for things to worsen again. Trump and Xi are sure to make positive noises after their talk, and that will likely boost stocks, but behind their leaders, the governments of the US and China continue to throw punches.

CySEC (EU)

  • Client’s funds are kept in segregated bank accounts
  • FSCS Investor Compensation up to EUR20,000
  • Negative Balance Protection

Products

  • CFD
  • Share Dealing
  • Quantranks

Markets.com, operated by Safecap Investments Limited (“Safecap”) Regulated by CySEC under License no. 092/08 and FSCA under Licence no. 43906.

FSC (GLOBAL)

  • Clients’ funds kept in segregated bank accounts
  • Electronic Verification
  • Negative Balance Protection

Products

  • CFD
  • Strategy Builder

Markets.com, operated by TradeTech Markets (BVI) Limited (“TTMBVI”) Regulated by the BVI Financial Services Commission (‘FSC’) under licence no. SIBA/L/14/1067.

FCA (UK)

  • Client’s funds are kept in segregated bank accounts
  • FSCS Investor Compensation up to GBP85,000
    *depending on criteria and eligibility
  • Negative Balance Protection

Products

  • CFD
  • Spread Bets
  • Strategy Builder

Markets.com operated by TradeTech Alpha Limited (“TTA”) Regulated by the Financial Conduct Authority (“FCA”) under licence number 607305.

ASIC (AU)

  • Clients’ funds kept in segregated bank accounts
  • Electronic Verification
  • Negative Balance Protection

Products

  • CFD

Markets.com, operated by Tradetech Markets (Australia) Pty Limited (‘TTMAU”) Holds Australian Financial Services Licence no. 424008 and is regulated in the provision of financial services by the Australian Securities and Investments Commission (“ASIC”).

FSCA (ZA)

  • Clients’ funds kept in segregated bank accounts
  • Negative Balance Protection

Products

  • CFD
  • Strategy Builder

Markets.com, operated by TradeTech Markets (South Africa) (Pty) Limited (“TTMSA”) Regulated by Financial Sector Conduct Authority (‘FSCA’) under the licence no. 46860.

Selecting one of these regulators will display the corresponding information across the entire website. If you would like to display information for a different regulator, please select it. For more information click here.

Marketsi
An individual approach to investing.

Whether you’re investing for the long-term, medium-term or even short-term, Marketsi puts you in control. You can take a traditional approach or be creative with our innovative Investment Strategy Builder tool, our industry-leading platform and personalised, VIP service will help you make the most of the global markets without the need for intermediaries.

Share Dealing in the Markets Group is only offered by Safecap Investments Limited regulated by CySEC under license number 092/08. We are now re-directing you to Safecap’s website.

Redirect