As published on cityam.com, Monday August 26, 2019.
US and European stock markets climbed into the green today after US President Donald Trump calmed investors by saying China was seeking an end to the two sides’ raging trade war.
At the G7 world leaders’ summit in France, Trump said: “We are having very meaningful talks, much more meaningful I would say than any time frankly.”
He said: “China called last night our top trade people and said: ‘Let’s get back to the table.’ So we’ll be getting back to the table, and I think they want to do something.”
In China, vice premier Liu He said in separate comments that Beijing wanted to reach a solution to the trade war via “calm” negotiations.
Trump later said in a press conference at the end of the summit in Biarritz that Liu’s words were proof that China “want to make a deal very badly”.
Talk of a solution to the long-running trade conflict boosted Wall Street. The tech-heavy Nasdaq had risen 1.2 per cent by 5.30pm UK time, while the S&P 500 had climbed one per cent and the Dow Jones industrial average was 1.1 per cent higher. The dollar had risen 0.3 per cent against the euro to €0.889.
Germany’s Dax index had climbed 0.4 per cent, France’s CAC 40 had climbed 0.5 per cent, while the pan-European Euronext 100 had risen 0.3 per cent.
As investors returned to riskier assets, yields on government bonds fell. The yield on the two-year US government bond, called a Treasury, had risen 1.4 basis points (0.014 percentage points) to 1.534 per cent. The yield on Germany’s 10-year bond rose 0.8 basis points to minus 0.664 per cent.
The gains came after a bruising day of falls on Friday following Trump’s announcement he would ramp up tariffs on almost all Chinese goods.
He said he would raise existing levies on $250bn of Chinese goods to 30 per cent from 1 October, and hike tariffs on $300bn of Chinese goods from 10 per cent to 15 per cent in September.
Trump was responding to China putting tariffs on $75bn of US goods, which was itself in retaliation for US tariffs.
The trade war escalation sent US stock markets tumbling. The tech-heavy Nasdaq closed three per cent lower on Friday while the S&P 500 and Dow Jones made similar losses.
Trump claimed at the press conference at the end of the G7 summit today that China had lost three million jobs due in large parts to his tariffs. “Their chain is breaking up like no one has seen before. Once that happens it is very hard to put it back together. I think they very much want to make a deal.”
Earlier on Monday, Chinese vice premier Liu said at a Chinese tech conference: “We are willing to resolve the issue through consultations and cooperation in a calm attitude and resolutely oppose the escalation of the trade war.”
Edward Moya, New York senior market analyst at foreign exchange firm Oanda, said: “This trade war is having more plot twists than a Quentin Tarantino movie.”
“Trump’s biggest escalation in the tariff war is a risky move,” he said, “that will punish the US consumer and possibly send the US economy closer to a recession by the 2020 election.”
“The potential is still there for him to de-escalate the situation, but no-one can predict his behaviour.”