President Donald Trump said on Monday that China is ready to come back to the negotiating table and the two countries will start talking very seriously.Politicsread more
The escalating trade war between Washington and Beijing dominated discussions at the G-7 gathering in France.Politicsread more
China's state media is putting up a brave front as the country's trade war with the U.S. escalated sharply over the weekend.China Economyread more
The latest round of tariff announcements in the last few days means that by the end of the year, essentially all Chinese goods exported to the U.S. will be subject to duties.China Economyread more
U.S. stock futures surged Monday morning after President Trump said China is ready to come back to the negotiating table following a phone call Sunday and the two countries...Marketsread more
As Washington and Beijing continue to up the ante in their protracted trade fight, the potential of a recession in the U.S. is now "the biggest concern," according to Standard...US Economyread more
Tensions stemming from the U.S.-China trade war escalated sharply over the last few days, with much happening as Asian markets were shut down for the weekend.China Economyread more
Clouding the G-7 gathering, which represents the world's major industrial economies, are the tit-for-tat tariffs between Washington and Beijing.Politicsread more
Neither the U.S. nor China wants to be seen as the party that derailed trade talks, says William Reinsch of Center for Strategic and International Studies.World Economyread more
China said Friday it will be resuming 25% duties on U.S. autos, and a further 5% on auto parts and components.Asia Marketsread more
World leaders, environmental groups and celebrities have publicly decried the vast swaths of forest being destroyed by the fires.World Newsread more
Stocks have been whipped by headlines on trade, and on Thursday alone the market was encouraged by comments from Trump that he wanted a deal but then disappointed when he said he wasn't sure he would agree to one. Equities also fell because of reports that Trump trade advisor Peter Navarro, a China hawk would be in attendance at the dinner meeting Saturday night. But then the market bounced on a Wall Street Journal report that said the U.S. and China were exploring a deal where the U.S. would hold off of further tariffs until spring, to allow for negotiations.
"The market is pricing in some degree of further escalation, breakdown of talks. If we have an agreement, then you price out the downside," said Keith Parker, head of U.S. equity strategy at UBS.
Many analysts believe the two sides could announce they will negotiate, somewhat calming the market, but the U.S. will likely increase tariffs as expected, to 25 percent in January. Strategas Research gives this scenario 40 percent odds.
But if Trump agrees to hold off on increasing those tariffs, now 10 percent on $200 billion in Chinese goods and agrees to hold off putting tariffs on a wider group of goods as talks proceed, that could be a big positive for stocks.
Strategas gives this scenario 30 percent odds, and if there's an even better deal where there are no new tariffs and some are removed, the odds fall to 20 percent. In a note, Strategas saw just a 10 percent chance of absolute failure.
Trade and the Fed have been the two big fears hanging over the market, as it has sold off in October and November. After a 4.3 percent bounce back this week, the Dow is now up nearly 2.5 percent for the year. It surged more than 617 points Wednesday, after Fed Chairman Jerome Powell said the fed funds rate was close to neutral, meaning interest rates do not need to be raised much more.
The S&P 500, ending Thursday at 2,737, is up 4 percent for the week and is now up 2.4 percent for the year.
"To me the Powell comments were above and beyond what I expected. The market is pricing that in, and if there's a 25 percent tariff off the table that's worth 1.5 to 4 percent in equities, based on our earnings model," said Parker.
If instead, talks breakdown and the U.S. moves forward on further tariffs, the S&P 500 could slide about 200 points to 2,550, Parker said.
"My theory is that the markets are having tremendous influence on Jay Powell and on Donald Trump. I don't think Powell blinked because of Trump. If Powell blinked, it was because of the market and I'd make a similar comparison to the markets and trade. The markets have sent a clear signal," said Greg Valliere, chief global analyst at Horizon Investments.
Valliere said he believes Trump is more sensitive to the market's moves. "I think the market blowback to Trump's trade policies took him aback. I think he feels he's going to get something out of Buenos Aires. The question is, 'what is something?' The very least is a good atmospherics, a good photo op, a nice dinner. They superficially get along? I think they need to issue a statement they are planning to speed up the pace on talks and try to get a resolution," said Valliere.
"The ultimate bargaining chip is to back away from the additional 25 percent tariffs at the end of the year," he said. "I've thought all along that would be part of an agreement in Buenos Aires. Just as Powell listened to the markets, I think Trump listens to the markets. I think on both Fed policy and China trade policy, the markets will have gotten their way. The markets should be pleased with both Powell and Trump listening to their message."
As for a trade deal, Valliere said it could take a while and come later in the year. "China is a very proud country, and it will take many months to get a deal," he said.