Stock market: Trump, Xi ceasefire doubts send market tumbling

Written by The ReReport

The US stock market has plunged as fears of a global economic crisis intensify, after the Trump administration raised doubts about the substance of a US-China trade war ceasefire. Investors had initially welcomed the truce that the administration said was reached over the weekend in Buenos Aires between Presidents Donald Trump and Xi Jinping — and sent stocks soaring yesterday.But after a series of confusing and conflicting words from Trump and some senior officials, stocks have tumbled. As of 8am (AEDT), the Dow Jones sunk as much as 800 points.Boeing and Caterpillar, two major exporters who would have much to lose if trade tensions don’t ease, weighed the most on the Dow.Bond prices soared sharply, sending yields lower, as traders shoved money into lower-risk investments.The sharp drop in yields hurt banks because it makes it is harder to earn money from lending. JPMorgan Chase sank 4.5 per cent.The S&P 500 lost 90 points, or 3.2 per cent, to 2,700.The Dow dropped 799 points, or 3.1 per cent, to 25,027. The Nasdaq fell 283 points, or 3.8 per cent, to 7158.MORE: Trump praises Morrison at G20 summitmedia_cameraStocks have taken a hit after the G20 summit. Picture: STR/AFPIt comes after White House aides struggled to explain the details of what the two countries actually agreed on. And China has not confirmed that it made most of the concessions that the Trump administration has claimed.“The sense is that there’s less and less agreement between the two sides about what actually took place,” said Willie Delwiche, investment strategist at Baird.“There was a rally in the expectation that something had happened. The problem is that something turned out to be nothing.”Other concerns contributed to the stock sell-off, including falling long-term bonds.That suggested that investors expect the US economy to slow, along with global growth, and possibly fall into recession in the coming year or two.Trump and White House aides promoted the weekend deal as a historic breakthrough that would ease trade tensions and potentially reduce tariffs.They said that China had agreed to buy many more American products and to negotiate over the administration’s assertions that Beijing steals American technology. But by this morning, Trump was renewing his tariff threats in a series of tweets.“President Xi and I want this deal to happen, and it probably will,” Trump tweeted.“But if not remember, I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so.”media_cameraUS President Donald Trump has gone on a tweeting spree raising concerns about a US, China trade deal. Picture: Alex Edelman/AFPmedia_cameraChina’s President Xi Jinping reportedly wants a trade deal to happen. Picture: Luis Acosta/ AFPTrump added that a 90-day timetable for negotiators to reach a deeper agreement had begun and that his aides would see “whether or not a REAL deal with China is actually possible.” The president’s words had the effect of making the weekend agreement, already a vague and uncertain one, seem even less likely to lead to a long-lasting trade accord.“We expect the relationship between the world’s two largest economies to remain contentious,” Moody’s Investors Service said in a report.“Narrow agreements and modest concessions in their ongoing trade dispute will not bridge the wide gulf in their respective economic, political and strategic interests.”Among the conflicting assertions that White House officials made was over whether China had actually agreed to drop its 40 per cent tariffs on US autos.In addition, Treasury Secretary Steven Mnuchin said on the Fox Business Network that China agreed to buy $1.2 trillion of US products. But he added, “if that’s real” — thereby raising some doubt — it would close the US trade deficit with China, and “we have to have a negotiated agreement and have this on paper.”Many economists have expressed scepticism that very much could be achieved to bridge the vast disagreements between the two countries in just 90 days.“The actual amount of concrete progress made at this meeting appears to have been quite limited,” Alec Phillips and other economists at Goldman Sachs wrote in a research note.During the talks in Buenos Aires, Trump agreed to delay a scheduled escalation in US tariffs on many Chinese goods, from 10 per cent to 25 per cent, that had been set to take effect January 1.Instead, the two sides are to negotiate over US complaints about China’s trade practices, notably that it has used predatory tactics to try to achieve supremacy in technology.These practices, according to the administration and outside analysts, include stealing intellectual property and forcing companies to turn over technology to gain access to China’s market.media_cameraTraders work on the floor of the New York Stock Exchange (NYSE). Picture: Getty/AFPIn return for the postponement in the higher US tariffs, China agreed to step up its purchases of US farm, energy and industrial goods, the White House said.Most economists noted that the two countries remain far apart on the biggest areas of disagreement, which include Beijing’s subsidies for strategic Chinese industries, in addition to forced technology transfers and intellectual property theft.Kudlow acknowledged those challenges in remarks today.“China’s discussed these things with the US many times down through the years and the results have not been very good,” he said.“So this time around as I said, I’m hopeful, we’re covering more ground than ever … So we’ll see.”On Sunday, Trump had tweeted late on Sunday that China had agreed to “reduce and remove” its 40 per cent tariff on cars imported from the US Treasury Secretary Steven Mnuchin said that there was a “specific agreement” on the auto tariffs.Yet Kudlow said later that there was no “specific agreement” regarding auto trade, though he added, “We expect those tariffs to go to zero.”Shares of US and overseas auto companies rose on the announcement, though it’s unclear how much companies like GM or Ford will actually benefit. Nearly all the cars they sell in China are made there.Details regarding China’s pledge to buy more American products — one that it has made before — remain scant.Kudlow said the ultimate amount China will purchase will depend on market prices and the health of China’s economy.Regarding the $1.2 trillion figure, “I would think of that as a broad goal,” he said.State-run Chinese media has described the agreement very differently from how the Trump administration has. It has made no mention of any changes to its auto tariffs. And it has said nothing about a 90-day deadline for the talks.Local shares have been boosted by a temporary trade truce between the US and China following talks at the G20 summit. The ASX 200 climbed 104 points or 1.8% with all sectors in positive territory, led by materials and energy.
CommSec: Market Close 3 Dec 18- Aussie shares jump on US-China trade optimismOriginally published as US-China trade drama sends stock market tumbling

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