Equities Traders Spooked By Trade Deal Comments

Deal Not Done Yet

Risk markets have recovered today following some jitters seen across yesterday’s session.

These came in response to reports that the US-China trade deal might not be as “done” as comments have suggested.

Reuters ran a story yesterday reporting White House officials as saying that while negotiations are continuing between the US and China, the deal might not necessarily be ready in time for Trump and Xi to sign it at the upcoming APEC meeting in November.

The White House official told reporters:

“If it’s not signed in Chile, that doesn’t mean that it falls apart. It just means that it’s not ready. Our goal is to sign it in Chile. But sometimes texts aren’t ready. But good progress is being made and we expect to sign the agreement in Chile”.

The official was keen to stress that the aim remains to have the deal signed in Chile. However, as of yet, the date is still fluid and could move back if the deal is not finished.

US & China Have An Understanding

However, the market is still hopeful that the two sides will agree on a deal. 

This sentiment is in line with the recent optimism shown by both US and Chinese officials on the back of last week’s talks. Speaking at the Future Investment Initiative Conference in Riyadh yesterday, White House adviser Jared Kushner said:

“I think people understand the President, that he’s firm, they know that he’s going to make the decisions that he thinks are right, and I think ultimately that we’ve come to an understanding with China now on where we want to head.”

Indeed, Kushner also acknowledged the political cost of the trade war for Trump saying:

“All of the costs of it, the tariffs, the retaliation that people have put on, he’s paid the price for, during his presidency.”

Kushner added that he believed the US Treasury Secretary and Trade Representative have made a “fabulous deal” in their negotiations with Chinese officials.

Trump Talks Equities Up to New Highs

Speculation that a deal is forthcoming was heightened on Monday. This came following comments from Trump who noted that the deal with China was “ahead of schedule”.

Trump’s comments sparked a 100 point rally in the S&P which saw it surging up to fresh all-time highs.

Tariff Threat Remains

If the current optimism from both US and Chinese leaders isn’t enough to keep markets encouraged that the two sides will agree on a deal, then the threat of further tariffs might help.

The US has warned that the Chinese do not sign a deal by December 15^th at the latest, it will press ahead with the next round of tariffs of 15% on $156 billion of Chinese goods.

US Trade Adviser Says China “Miscalculated”

Trump’s trade adviser Pete Navarro  told CNN:

“The Chinese have consistently miscalculated going back to Mar a Lago, they misread the signal of resolve and strength by the president. And as a result, they’ve slow-walked us and reneged on deals and all they’ve gotten is a tougher and tougher stance.”

Headlines around the ongoing trade talks are likely to be volatile, yielding neurotic market reactions. However, traders will be doing their best to focus on the facts. 

Currently, the negotiations are continuing. The hope is that they can reach a deal in November, allowing room to move on to discussing the “phase two” deal.

Technical Perspective

After breaking out above the 3028.08 level to print fresh all-time highs, SPX500 has subsequently tested the top of the recent bullish channel. This is holding as resistance for now.

The RSI indicator is showing some mild bearish divergence here. However, while we hold above the 3028.08 level, focus remains on a further push higher. If we break back below that level, the 3011.96 level bullish channel low will be the key support zone to watch.