Traders have been playing "Chutes and Ladders" with conflicting trade headlines all week. But as President Trump prepares to meet with Chinese Vice Premier Liu He Friday afternoon, the market has latched on to hopes that a partial - or "skinny" - trade deal might be reached.
For those who haven't paid attention to every twist and turn in the trade-talk narrative over the past week, here's a very brief summary of where we stand.
Downbeat reports about China's delegation planning to depart from Washington a day early morphed into positive headlines on Thursday as the two sides held their first face-to-face meeting in months.
As Trump assured investors that everything was going great, there were reports that the two sides had decided on a currency agreement. But by Friday morning, that had morphed into China offering to scrap its requirement that foreign financial services companies find a local partner before opening up shop on the mainland. Others reported that Washington might ease sanctions on Huawei. Meanwhile, sources told BBG that the currency agreement resembled a deal that the two sides had hammered out earlier this year before talks broke down.
On Friday, with the trade-deal "hopium" driving markets higher, investors ignored the fact that Liu hasn't been given the authorization to negotiate on behalf of President Xi, Reuters reminds us. Adding to the insanity, Liu reportedly has a "letter" from President Xi that he has been instructed to deliver to Trump.
But this time around, Beijing has more incentive to be flexible: The next planned hike of US tariffs is set for Oct. 15. And with the Chinese economy on tenterhooks, Beijing needs to right the ship.
That aside, America's business leaders have been doing some jawboning of their own. Last night, a report citing the US-China Business Council claimed that the deal "is going to be smaller than some people had hoped" - but that both delegations will at least walk away with "something."
Just one week ago, a flurry of reports about punitive measures being considered by the White House to punish China weighed on stocks. That changed quickly.
Amusingly enough, the 'hopium' afflicting US investors on Friday appeared to spread across the Atlantic, as optimism about a Brexit deal between the UK and EU27 sent the pound on a tear.
Even Global Times editor Hu Xijin - a mouthpiece for Beijing - claimed that the talks were going "better than media expectations." As editor of a state-run tabloid, Hu is effectively speaking on behalf of Beijing.
Situation of the trade talks seems to be better than the media expectations. Let's see how the following talks will be going.— Hu Xijin 胡锡进 (@HuXijin_GT) October 11, 2019
Meanwhile, President Trump (in a series of tweets Friday morning) reiterated that "Good things" are happening with the trade talks, and that "one of the great things about the China Deal is the fact that, for various reasons, we do not have to go through the very long and politically complex Congressional Approval Process."
Good things are happening at China Trade Talk Meeting. Warmer feelings than in recent past, more like the Old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen!— Donald J. Trump (@realDonaldTrump) October 11, 2019
One of the great things about the China Deal is the fact that, for various reasons, we do not have to go through the very long and politically complex Congressional Approval Process. When the deal is fully negotiated, I sign it myself on behalf of our Country. Fast and Clean!— Donald J. Trump (@realDonaldTrump) October 11, 2019
Will be with our two GREAT Senators, @SenJohnKennedy & @SenBillCassidy, tonight in Louisiana. These two hard working, really smart men, love their Country and love their State. We will hopefully add a Great New Republican Governor to the beautiful Louisiana mix! See you tonight!— Donald J. Trump (@realDonaldTrump) October 11, 2019
It's worth noting that some of the president's allies in the conservative media, including Laura Ingraham, sphere are subtly pressuring the president not to cave and agree to a bad deal.
Investor friends telling me everyone expecting @realDonaldTrump to cave and announce a weak trade deal with China today. Would be a MASSIVE mistake on many fronts.— Laura Ingraham (@IngrahamAngle) October 11, 2019
As a reminder, here's a timeline of the US-China trade war, courtesy of China Briefing.
Trump is set to meet with Liu at 2:45 pm ET at the White House. So, expect a deluge of headlines right before the close.
And if we do see stocks surge into the close (a pattern that's no doubt familiar to most market-watchers by now), will that set markets up for another crash on Monday on news hitting on Saturday and Sunday?
But perhaps the chart above illustrates the biggest irony here, as one Twitter user acknowledged, is the fact that Trump's trade battle has turned into "a giant stock pumping scheme" benefiting the wealthiest Americans (i.e. those who own, and actively trade, stocks), when the trade war was intended to benefit working-class Americans who saw their manufacturing jobs outsourced to lower-cost markets like China and India.
The irony is the trade talks which were intended to help ordinary Americans have turned into a giant stock pumping scheme helping the top 10% who own most of the stocks— Hipster (@Hipster_Trader) October 11, 2019