Trade Truce Stock Market

Stock markets surged on Monday early morning following Saturday’s meeting between President Trump and Chinese President Xi, where the two called a trade truce in the ongoing tit-for-tat.

Chinese President Xi Jinping and his U.S. equivalent Donald Trump concluded their high-stakes meeting at the G20 summit in Osaka, Japan, with the American leader declaring the discussions were “better than expected”.

Trump noted that current U.S. tariffs would remain in place against a number of Chinese imports while negotiations proceed, although the U.S. President also noted that additional trade charges he has threatened against billions worth of other Chinese products will be put on hold for the “time being” as the two economic superpowers restart stalled talks.

Trump extended an olive branch to Xi regarding Chinese firm Huawei Technologies Co, the world’s biggest telecom network equipment maker. Trump said Saturday he would permit U.S. companies to sell their items to Huawei, however, he was not yet ready to remove the company from a trade blacklist.

The Trump administration has formerly said the Chinese firm is too close to China’s federal government and postures a domestic security threat, and has actively lobbied U.S. allies to keep Huawei separated from next-generation 5G telecoms infrastructure.

Xi, for his part, recounted the age of “ping-pong diplomacy” which helped jump-start U.S.-China relations two generations ago. Since then, he stated, “one basic fact remains unchanged: China and the United States both benefit from cooperation and lose in confrontation.”

It had been anticipated that the world’s two largest economies would agree to another trade truce– as they did after Xi and Trump met in Buenos Aires in December– but the news came as a relief to investors as markets rebounded and helped to calm fears of a further drop in China-US relations.

The apparent trade truce continues a pattern for Trump and Xi, who have repeatedly celebrated their relationship and paused protectionist procedures, just to see negotiations break down later.

Trade truce sparks stock market rally

Stock markets, which have been rattled by the almost year-long tariff tit-for-tat, are celebrating the trade truce, with the S&P 500 hitting a new high. Washington and Beijing have been trading tariffs on billions of dollars of imports for over a year, stoking fears of a wider global trade war. While the are tariffs remain while negotiations resume, the restored hope has been a boon for stocks across the board.

Stephen Innes, managing partner at Lead Markets wrote in a Sunday note that, “After the markets were stuck in trade-war limbo for the better part of two months, investors will breathe a massive, but exhausted, sigh of relief that both the U.S.-China opted to push the reset button and restart trade negotiation[s].”

Morgan Stanley had a more sobering message regarding the trade truce, however. A lead equity analyst for the firm, Michael Wilson explained, “A pause in rising trade tensions is not a fix for slowing US economic activity and earnings pressure.”

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