Risk is On After Positive Trade Comments from China

“We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with a calm attitude” Gao said
James Hyerczyk
US-China Resume Negotiations

Positive comments from China are turning the financial markets around on Thursday. A short while ago, China said it wished to resolve its protracted trade dispute with the world’s largest economy with a “calm” attitude. When asked about its seemingly escalating trade war with the U.S., China’s commerce ministry reportedly said Thursday that it was opposed to escalating trade tensions.

China’s Gao Feng Sets the Tone

Gao Feng, spokesman for China’s Ministry of Commerce, said Thursday.

“We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with a calm attitude,” Gao said, according to a CNBC translation of his Mandarin-language remarks. He noted that the Chinese and U.S. trade delegations have maintained “effective” communication.

Gao further added, “At present, there have been quite a lot of all kinds of sayings. In the area of economics and trade, we will clarify the facts and let everyone understand the truth.”

He declined to confirm whether Trump’s comments counted among such sayings. He also did not confirm a claim from President Trump on Monday which said the Chinese team had called the U.S. over the weekend with the desire of reaching a deal soon. Does it even matter? Old news.

Financial Market Reaction

David Madden, market analyst at CMC Markets UK, said “positive noises” from Beijing are pushing shares up.

“A spokesperson for China’s ministry of commerce, said that an escalation in trade tensions is not good for China, the US, or the rest of the world. Beijing reiterated its opposition to a trade war, and it will not discriminate against foreign firms operating in China, but at the same time it reminded the US it has ample retaliatory measures.”

“The largely hopeful tones of the update from China has lifted market sentiment, and that sparked buying this morning. US-China relations have been volatile recently, but for now there is a sense that things are heading in the right direction, and that has coaxed some traders back into the market.”

Shares are now trading higher in Europe and the United States, reversing earlier weakness after Gao’s remarks. The UK FTSE 100 is up 1.13%. German’s Dax is trading 1.20% higher and France’s CAC is up 1.44%.

In the U.S, September 10-year U.S. Treasury notes and 30-year Treasury bond futures contracts are trading lower as yields recover from earlier weakness. The 10-year yield is higher at 1.493%, up 0.0025% and the 30-year yield rose to 1.971%, up 0.332%. Notes and bonds trade opposite of yields.

Currently, the 2-year and 10-year Treasury note yields remain inverted at 1.524% and 1.493% respectively. If the news is bullish enough then perhaps the yield curve will go back to its normal relationship.

Safe-haven gold is trading 0.02% lower. The Japanese Yen is down 0.18% and the Swiss Franc is off 0.12%. This serves as early proof that today may turn into a “risk on” trading session.

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