Stocks soar with China’s Xi seen calming tensions

WASHINGTON:

Markets decided to go with China’s President Xi Jinping, rather than US President Donald Trump, who once again went to Twitter to complain about trade between the two countries.

Traders are anticipating a statesmanlike performance from President Xi in a speech Tuesday at the Boao Forum for Asia. While senior officials are examining options in case matters get worse, he was expected to deliver a strong warning about the consequences of an escalation to a full trade war.

US stocks took off on Monday. The S&P 500 Index rose more than 1 per cent after tumbling 1.4 last week, while strength in semiconductors, software and technology hardware pushed the Nasdaq 100 Index and Nasdaq Composite Index up more than 1.5 per cent. The Dow Jones Industrial Average was up almost 300 points at 3:30pm GMT.

Trump, on the other hand, complained yet again about “STUPID TRADE” with China, doing little to calm investors anxious about the escalating trade conflict between the two economic superpowers.

In a tweet on Monday morning Trump said that when a Chinese-made vehicle is sent to the US, the tariff is only 2.5 per cent, while American cars exported to China are slapped with a 25 per cent tariff.

Trump’s top economic advisers have offered mixed messages as to the best approach with China. Beijing has threatened to retaliate if Washington follows through with its proposed tariffs, even as Trump emphasised his bond with Chinese President Xi Jinping. He has suggested in previous tweets that a deal could be reached.

But Trump did not explain why, amid a week of economic sabre-rattling between the two countries that shook global markets, he felt confident a deal could be made.

The president made fixing the trade imbalance with China a centrepiece of his presidential campaign, where he frequently used incendiary language to describe how Beijing would “rape” the US economically. But even as Trump cozied up to Xi and pressed China for help with derailing North Korea’s nuclear ambitions, he has ratcheted up the economic pressure and threatened tariffs, a move opposed by many fellow Republicans.

“What the market will now want to hopefully see is some form of negotiation starting between the Chinese and the Americans,” James Barty, Bank of America Corp.’s head of global cross-asset and European equity strategy, said on Bloomberg TV. “It’s not in anybody’s interest to go down to a full-blown trade war.”

The Trump administration has said it is taking action as a crackdown on China’s theft of US intellectual property. The US bought more than $500 billion (Dh1.84 trillion) in goods from China last year and now is planning or considering penalties on some $150 billion of those imports. The US sold about $130 billion in goods to China in 2017 and faces a potentially devastating hit to its market there if China responds in kind.

China has pledged to “counterattack with great strength” if Trump decides to follow through on his latest threat to impose tariffs on an additional $100 billion in Chinese goods — after an earlier announcement that targeted $50 billion. Beijing also declared that the current rhetoric made negotiations impossible, even as the White House suggested that the tariff talk was a way to spur China to the bargaining table.

The new White House economic adviser, Larry Kudlow, said Sunday that a “coalition of the willing” — including Canada, much of Europe and Australia — was being formed to pressure China and that the US would demand that the World Trade Organisation, an arbiter of trade disputes, be stricter on Beijing. And he said that although the US hoped to avoid taking action, Trump “was not bluffing.”

“This is a problem caused by China, not a problem caused by President Trump,” Kudlow said on “Fox News Sunday.”

— AP & Bloomberg