Trade War Has Reached Peak Ridiculousness
On the eve of the highly anticipated trade talks in Washington between the Chinese and U.S. delegations, every bear and bull futures trader was likely wiped out. After rallying most of the day yesterday, markets began to sell off into the close as the Chinese lowered their expectations for progress following the addition of Chinese companies to the U.S. trade blacklist. Starting just after 6:00 PM EST, you had to continuously pound F5 to keep up with the alternating negative and positive headlines that hit the wires nonstop throughout the night.
The first headline that sparked selling was a report that deputy-level talks leading up to the high-level talks failed to make any progress. The sources said the talks failed to get anywhere on some of the largest issues, which include Chinese state subsidies and forced technology transfers, as well as delaying an increase in tariffs that is set to go into effect next Tuesday. The sources said the Chinese delegation could potentially leave the talks a day earlier than planned.
It wasn't long before the White House released a statement in an attempt to stop the selling. They said the initial report was incorrect and "We are not aware of a change in the Vice Premier’s travel plans at this time.” It worked - futures surged and recovered the losses from the first headline.
Then, almost immediately, markets gave up the gains following the White House's statement after a report said the Chinese delegation will only stay for one day of talks, rather than both days.
As markets sold off once again, the White House took a second stab at halting the selling. The latest report said the U.S. is considering a partial deal via a previously agreed currency pact that could see the tariff increases frozen. Coincidentally, just a few weeks ago, Trump said he wanted a "complete deal."
Additional alternating positive and negative headlines continued to pour in. They included Trump giving the OK for American companies to sell nonsensitive goods to Chinese company Huawei, the Trump administration weighing options to crack down on shipments of contraband goods from China and U.S. Commerce Secretary Wilbur Ross saying "China trade practices have gotten worse."
The bottom line is this whole process has become a complete farce and is bad for markets as they swing on the whims of fake, real and repeated news.
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