(Bloomberg) – US futures futures futures reversed losses after President Donald Trump said China wants to restart trade talks, erasing a decline earlier as investors struggled with the increasingly complex task of assessing the effects of a trade war on economy and corporate profits.
Trump said Monday that China has asked to start trading talks, hours after Beijing's top negotiator publicly asked for calm in response to a high tariff weekend that sent global shares plummeting.
"China called our traders last night and said let's get back to the table," Trump said on the sidelines of the Group of 7 meeting in Biarritz, France. "They understand how life works."
Shares are swung by events from before and during the weekend. Shares plunged Friday after Trump warned of an unspecified response to China's plan to slash new US $ 75 billion US tariffs. After the markets closed, he said he would increase existing tariffs, spent around $ 250 billion in Chinese goods, to 30% from 25% from October 1. He also said that a new round of $ 300 billion in goods will be taxed at 15%, up from 10%.
"This is a kind of norm, in terms of what's happening, much of the market activity has been geopolitically driven and the president escalates the trade war," said David Katz, chief investment officer at Matrix Asset Advisors in Westchester, New York. “But unfortunately there is something investors will live with. There is nothing much you can do either way. "
The US and China back and forth singled out comments from Federal Reserve Chairman Jerome Powell, who said the US economy is in a favorable position, but faces" significant risks, "reinforcing efforts for yet another interest rate cut.
Chinese Deputy Prime Minister Liu Han, the country's top trade negotiator, said he "strongly opposes" an escalation of a trade war, and that it "does not contribute to China, the United States and interests. of people around the world, "Caixin reported on Monday.
Movements in the future follow four straight down weeks that pushed the S&P 500 nearly 6 percent below the record-setting July 26. Volatility has increased in August, with more than half the sessions showing swings at 1% or more, although US stocks are still more than 20% above the levels at the end of December.
"Many investors or players are gone, and this kind of volatility is easy because of that In fact, "W change" Bucky "Hellwig, senior vice president of BB&T Wealth Management in Birmingham, Alabama, said on the phone. “'But it is very disappointing to see sales so dramatically at first. ”
The S&P 500, which closed Friday at 2,847.11, has twice bounced back from violent drops in August. When the index fell to 2,844 in the first days of the month, the bulls sent 3.3% higher over the next three days. An almost identical rally happened again a week later when stocks fell to 2840.
Fluctuations as they have frustrated all those trying to chart a continuous course in the market. The causes of anxiety pile up. The return on government bonds sends bleak signals about the economic future, with the 10-year government bond hovering close to 1.5%, while corporate surplus estimates have fallen. On Sunday, two top aides said Trump has the authority to force US companies to leave China, which he threatened on Twitter, but whether he invokes those powers is another matter.
"For these events to unfold in front of one of this year's slowest trading weeks potentially creates a market crash," said Michael O. & # 39; Rourke, JonesTrading's chief market strategist. "Overcrowded complacency coupled with illiquid trading, expensive valuations, narrow leadership, slowing earnings and unparalleled peacetime political uncertainty puts the markets in a dangerous position."
watermark from January 2018, which means people who bought that time, during the biggest demonstration of Trump's presidency, remain stuck. Of greater interest to chart analysts, the index is now only 7 points above low levels, which was lowered earlier in August.
Dip buyers entered when S&P approached 2,840 twice before, driven by optimism the economy is strong and the trade war solvable. Whether they will be equally safe after Trump tweeted that the United States would be "better off without" China is an open question – and they were not on Sunday.
"Given the global downturn already taking hold and limiting the potential of a recession, this additional uncertainty is not wanted to say the least." The reaction does not surprise me. Investors are responding to a legitimate escalation. Obviously this is even clearer evidence of the need for more economical and financial accommodation. "
Map analysts look at 2,820, twice an intraday low for the S&P 500 this month. If this is breached, the 2,800 line will be look at, according to Frank Cappelleri, senior stock trader and market technician at Instinet LLC. It's about the 200-day moving average that supported the meter all year and also a place where stocks peaked three times late last year.
"It's good that There are disadvantages with reference points that are clear to market engineers – 2820, when 2800, June low, May low, "Cappelleri said on the phone. "What's not so great is all the uncertainty along the way."
(Updates with Trump's comments on China, index levels.)
– With help from Sarah Ponczek and Filipe Pacheco.
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