Advertisement
Advertisement

US Stock Market: Don’t Worry About Details, Just Hope Trade Talks Resume

By:
James Hyerczyk
Published: Aug 27, 2019, 07:56 UTC

We all know that hope, fear and greed drive the markets. On Friday, fear was behind the steep sell-off. It attempted to show up again early Monday, but

U.S. Stock Markets

We all know that hope, fear and greed drive the markets. On Friday, fear was behind the steep sell-off. It attempted to show up again early Monday, but hope arrived to save the day, fueling a substantial reversal to the upside in U.S. stock market. The catalysts behind both moves were U.S.-China trade relations and President Trump.

In the cash market on Monday, the benchmark S&P 500 Index settled at 2878.38, up 31.27 or +1.12%. The blue chip Dow Jones Industrial Average finished at 25898.83, up 269.93 or +1.06% and the technology-driven NASDAQ Composite Index closed at 7853.74, up 101.97 or 1.34%.

Trump Says China Ready to Negotiate

President Trump, well aware of his ability to move the markets with his tweets, reversed the early losses and turned the major indexes higher when he said China is ready to come back to the negotiating table following a phone call Sunday.

Speaking to reporters at the Group of Seven (G-7) meeting in Biarritz in France Monday, Trump said the two economic powerhouses would start talking very seriously.

“China called last night our top trade people and said, ‘let’s get back to the table’ so we will be getting back to the table and I think they want to do something. They have been hurt very badly but they understand this is the right thing to do and I have respect for it. This is a very positive development for the world,” Trump said.

China Fails to Confirm or Deny Trump’s Statement

After the initial burst to the upside following Trump’s statement, the stock index rally stalled. The price action suggests the first move was short-covering as the weaker bearish traders gave Trump the benefit of the doubt. However, the lack of follow-through to the upside throughout the session indicates to some extent that perhaps investors think that Trump made the whole thing up.

On Sunday, before Trump’s statement, Chinese Vice Premier Liu He said that China was willing to resolve the trade dispute through “calm” negotiations.

“We are willing to resolve the issue through consultations and cooperation in a calm attitude and resolutely oppose the escalation of the trade war,” Liu, who is President Xi Jinping’s top economic adviser, said, according to a government transcript.

“We believe that the escalation of the trade war is not beneficial for China, the United States, nor the interest of the people of the world,” he added.

After Trump’s statement, China’s Foreign Ministry spokesman Geng Shuang said he was not aware that a phone call between the two sides had taken place. When pressed on the details of the call, Trump said he didn’t want to elaborate and reiterated that the U.S. had multiple calls at the highest levels with the Chinese.

Should Investors Be Concerned?

On paper it looks as if Trump saw that Liu’s comments moved European markets higher early Monday then in a show of power, Trump moved the markets even higher with his positive remarks.

CNBC’s Jim Cramer took Monday’s early events every further saying, “The predominance of coverage this morning is that the President is lying. I’m not willing to say that he’s lying,” Cramer remarked. “We can doubt him, but in the end we’re doubting a guy that didn’t want the market to crash”.

In my opinion, it doesn’t really matter if there was a phone call or not. Trump obviously was trying to sound conciliatory without showing weakness. Besides softening his tone over the week-end, the phone call comment may have been his attempt to walk back some of his actions on Friday.

Liu said he was willing to resolve the trade dispute through “calm” negotiations. Trump says China is willing to talk. One official doesn’t let his ego get in the way, the other is all about ego and putting up a strong front.

However, as long as both sides are still willing to sit down at the negotiating table in September then this is a good thing for the markets. If both sides call a cease fire and stop the “tit for tat” responses over tariffs then this will be an even more positive move.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement