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Market Whiplash Over Trump Trade Tweet

Market

Global stock markets rebounded last night and this morning on the power of a Tweet that had everyone thinking that Washington and Beijing would reach a deal to halt the progression of a global trade war.

They were wrong, and Washington confirmed that later on Friday morning, with officials telling CNBC that there is no indication of an imminent agreement. The Dow, suffering from whiplash, quickly went negative after a nice rally.

By 12:05pm EST, the Dow looked like this:

(Click to enlarge)

It was lot to put on a Tweet from an American president who overly generous with the finger-tapping—and we’ve been down this road before, numerous times.

Right after a November 1 phone call with Chinese President Xi, Trump tweeted:

(Click to enlarge)

Markets responded immediately, with China leading the rebound.

(Click to enlarge)

Source: Asia Times

Trump’s tweet was immediately interpreted as “news of a potential trade breakthrough”, despite that fact that no such breakthrough was mentioned, and the Tweet says nothing other than “good conversation” and “moving along nicely”.

Nonetheless, China stocks rushed into a strong recovery Thursday night, with the benchmark Shanghai Composite Index gaining 2.7 percent and the Hong Kong Hang Seng index jumping 4.21 percent.

A simple tweet can help markets rally ahead of a key midterm election. What the markets did before Twitter, one can no longer imagine.

For China’s part, a Ministry of Foreign Affairs spokesperson said Friday that Trump and Xi had held a “deep discussion” and made progress. Related: The Divide Between Italy And The EU Is Growing

"I hope teams from both sides can implement the agreements achieved by the two countries' leaders," CNN quoted the spokesperson as saying.

The renewed optimism had also been spurred along by a Bloomberg follow-up to the Tweet, which claimed that Trump was keen to reach an agreement with Xi at the G20 meeting and had tasked key officials to start drafting potential terms with that in mind.

Washington’s late-morning rebuttal aside, keep in mind that the Tweets and the Bloomberg follow-up come at the same time as the U.S. has charged a Chinese state-owned company with conspiring to steal trade secrets from U.S. chipmaker Micron Technology Inc.

A grand jury in San Francisco returned a “multi-million defendant indictment alleging economic espionage on the part of a state-owned Chinese company, a Taiwanese company, and three Taiwan individuals for an alleged scheme to steal trade secrets from Micron”.

Attorney General Jeff Sessions made the announcement with comments published on the US Justice Department’s website, noting that Micron is worth around $100 billion and has 20-25 percent of the market share “dynamic random access memory industry—a technology not possessed by the Chinese until very recently”.

“Chinese economic espionage against the United States has been increasing,” Sessions said, “and it has been increasing rapidly.”

Related: Stablecoins: The Next Trend In Cryptocurrencies

Not all analysts were upbeat about the goings on in the ‘Twittersphere’, though, and skepticism and rationality still owned part of this day.

Ahead of Washington’s statement, Michael Every, head of Asia financial markets research at investment bank Rabobank, told CNN he suspected Trump's upbeat comments were intended to boost market sentiment ahead of elections.

"This seems a perfect way to ensure equities rally into election day, put Xi into a box in terms of what is expected of him in the terms of the deal ... and then have someone to blame when the deal then falls through," Every said.

By Fred Dunkley for Safehaven.com

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