Trump Denies WSJ Report, Says "Under No Pressure To Make Deal With China"

The reason why the market spiked yesterday just before noon, if briefly, was a WSJ report that the Trump admin is reaching out to China for a new round of trade talks, in an effort "to give Beijing another opportunity to address Washington’s concerns over trade issues before the Trump administration implements additional tariffs on Chinese imports."

Many took this with a grain of salt - after all this would be the third time in the past month that the US and China were supposedly trying to break the trade war deadlock - but more importantly, the person behind the outreach was noted globaliset Steven Mnuchin who as we said yesterday, "is well known to be for a resumption of better trade relations", while trade hawk Navarro has been pushing for a far more hard line stance with China.

To resolve this confusion, we said "Perhaps the best option is just to wait for Trump to tweet his own thoughts on the matter."

Well, moments ago Trump did just that, when he poured cold water on the diplomatic implications of the WSJ's report, tweeting that "The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us."

Why? Because as we also said yesterday, Trump remains convinced that he has all the bargaining leverage because - according to the stock market - he is winning the trade war with Beijing, to wit:

Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home.

So where does that leave us? Well, pretty much where we were before the WSJ report, or as Trump put it, "If we meet, we meet?"

While any other day, the Trump tweet - which could be seen as a catalyst for further trade disputes - would be bullish for the dollar and bearish for the S&P, today the combination of the CPI miss and the hawkish ECB has led to virtually no response at all in the market, at least for now, and stocks remained strongly higher, with the S&P above 2,900 and just shy of new all time highs.

That said, Chinese assets were clearly far more impacted, and the AUD slumped just as the the offshore Yuan quickly dropped over 200 pips on the Trump comment.