http://www.atimes.com/article/china-leads-market-recovery-as-predicted-trade-deal-em
Trump signals progress in talks after US stocks plunge in October
The popular large-cap China ETF (ticker FXI) led the S&P 500 during the market uptick of the past several days, driven by signals from Beijing and Washington that a resolution of the Sino-American trade dispute was possible.
President Trump this morning tweeted that he had made progress on trade negotiations with China, and had spoken by telephone with his Chinese counterpart Xi Jinping.
Donald J. Trump✔@realDonaldTrump
“Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!”
The October plunge in US equity prices, as well as weakness in recent US economic data, give the Trump Administration an incentive to reach a resolution with China.
As I reported from Beijing October 23, China is looking for a framework for a trade deal that would allow Trump to claim credit for better protection for American intellectual property as well as changes in China’s industrial policy. China may tone down its rhetoric about dominating high-tech industries under the “Made in China 2025” program, source of contention with the United States, although it will not abandon its economic goals.
I predicted October 25 that the slumping stock market would motivate the Trump Administration to seek a deal with China.
The October manufacturing survey of the Institute for Supply Management released Nov. 1 showed weaker-than-expected growth in US industry. The index fell from 58.8 to 56.8 while new orders fell from 61.8 to 57.4, and prices paid rose from 69.0 to 71.4. The numbers reflect the percentage of respondents who see expansion vs. contraction and came in far below the consensus of economic forecasters.
The Institute told Bloomberg news that tariffs are a concern to more than 40% of respondents in the broad-based survey. “Import tariffs and counter-tariffs are the biggest inhibitor to the expansion in manufacturing,” ISM official Timothy Fiore said.