Stocks Rally, Gold Breaks as Reports Say China Offered U.S. Import Boost

Investors celebrated the potential positive progress in U.S.-China trade talks on Friday by driving the major stock indexes sharply higher. U.S. Treasury yields also rose on the news, making the U.S. Dollar a more attractive investment, while driving down demand for the safe-haven Japanese Yen and gold.

Fueling the reactions in the markets was a report from CNBC that China had offered a six-year increase in U.S. imports during recent trade talks. Bloomberg News also reported on Friday that the deal would aim to reduce the annual U.S. trade deficit to zero by 2024.

Traders in these markets were already on edge before their regular session openings after the Wall Street Journal reported on Thursday that Treasury Secretary Steven Mnuchin was considering the idea of easing tariffs on Chinese goods as a means of moving along the negotiations for a new trade deal. The reaction to this news was cautious, however, because the report was refuted by a senior administration official who told CNBC that there is “no discussion of lifting tariffs now.”

The Details

According to CNBC, China has offered a six-year boost in imports during its ongoing talks with the U.S., officials familiar with the matter told CNBC.

Bloomberg news is saying that Chinese officials made the offer during the mid-level trade talks earlier in the month. Furthermore, China offered to increase its annual import of U.S. goods by a combined value of over $1 trillion, the officials told Bloomberg, which was the first to report on the import boost offer.

According to the latest data, the U.S. trade deficit with China in 2018 was $323 billion. If the deal is accepted, this deal would aim to reduce that annual trade difference to $0 by 2024, one of the officials told Bloomberg.

Additionally, sources told CNBC that China pegged its proposal to buy more U.S. goods through 2024 to President Donald Trump’s hopes of being re-elected in 2020.

High Level Talks Scheduled

CNBC is also reporting that China’s top trade negotiator, Vice Premier Liu He, will visit Washington, D.C., on January 30 for two days of talks with U.S. trade representative Robert Lighthizer. With this meeting scheduled for so late in the month, stock traders will have nearly two weeks to continue to push equities higher.

Talk of Weaker Dollar Premature

Today’s price action in the U.S. Treasurys suggests talk of a weaker U.S. Dollar may be premature since the rise in rates suggests investors are pricing in a stronger economy which could mean the Fed will have to raise rates. Of course, it all depends on whether a trade deal is reached over the short-run.