Meanwhile, the U.S.-benchmark, the SP 500, is inches away from setting a record and in three weeks will post the longest bull market in its history.
But not so in China.
Analysts are telling their clients to prepare for a long “bumpy” ride in the escalating trade conflict.
Safanad’s chief investment officer, John Rutledge, argued that Chinese President Xi Jinping doesn’t face much political pressure from his country‘s population. Earlier this year, China’s parliament passed a constitutional amendment that removes presidential term limits, enabling Xi to stay in office indefinitely.
“Xi doesn’t give a hoot about the poor people in China. Why do you think they attacked soybeans? Not just because of our farmers, but because he doesn’t care about the pressure from his own people,” he said Friday on CNBC.
“At this point, both sides seem to be digging for a long fight,” Helen Qiao, an economist at BofAML said Friday.
J.P. Morgan said the gulf between the two countries’ trade requirements will mean longer, more protracted negotiations.
“The gap between US’s demand list and China’s offer list is very large, and the back-and-forth of the negotiations in recent months suggests that neither side would make major concessions,” said Haibin Zhu, China equity strategist at J.P. Morgan. “Given the huge gap between the two sides, the outlook remains extremely unclear. Negotiations, even if resumed, will likely involve a bumpy and lengthy process.”
On Monday, China’s Shanghai composite fell 1.3 percent, extending its losing streak to four consecutive trading sessions. The index is down 18 percent so far this year compared with the SP 500’s 6 percent gain. The Asian country‘s benchmark is also down nearly 25 percent from its late January high.
“The broader picture is what could happen to the economies, the bigger economic impact, and if we did go down that path of rapid escalation, that could affect Chinese economic growth which is currently on a path toward slowing,” Peter Donisanu, global market strategist at Wells, said on July 5.
So far in the trade war between the two largest economic powers in the world, the U.S. has slapped tariffs on $34 billion of Chinese products, which China met with retaliatory duties. On Wednesday Trump instructed U.S. Trade Representative Robert Lighthizer to consider raising proposed tariffs on $200 billion in Chinese goods to 25 percent from 10 percent. In response, China said Friday that it is preparing to retaliate with tariffs on about $60 billion worth of U.S. goods.
“US-China trade tensions remains a big uncertainty and sentiment will likely remain cautious until there is further clarity on that front,” J.P. Morgan’s Zhu said in a note to clients Saturday.
“Tariffs are working far better than anyone ever anticipated. China market has dropped 27% in last 4 months, and they are talking to us. Our market is stronger than ever, and will go up dramatically when these horrible Trade Deals are successfully renegotiated. America First,” Trump said Saturday on Twitter.
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