In a headline that was taken as a welcome relief to all the trade-related uncertainty that finally appeared to be weighing on markets, the Wall Street Journal reported that President Trump will meet with Chinese President Xi Jinping at next month's G-20 meeting in Argentina, causing stocks to turn green and erase all of their losses post-open.
*TRUMP TO MEET CHINA'S XI AT G20 IN NOVEMBER: DJ
Dow futs were up 45 points on the news...
...erasing earlier losses.
However, the exuberance was doomed to be short lived because, during an interview with CNBC, economic advisor Larry Kudlow clarified that, while talks about a meeting between Trump and Xi were ongoing, a concrete agreement has not yet been reached. His comments sent stocks lower once again, with Dow futs moving off their session highs.
Kudlow added that "our asks [of the Chinese] have been pretty reasonable" and that China needs to accept that it will need to make more concessions - because the country is "going the wrong way on its economic policies" - to the US if it wants to end a trade war that's hammering its currency and stock markets, adding pressure to its most distressed companies and putting a damper on economic growth. Ironically, Kudlow, who along with Treasury Secretary Steven Mnuchin has been one of the biggest proponents of talks with the Chinese, was the source of information that effectively blunted the market's exuberance for said meeting, which Kudlow could have then used as leverage to push Trump to commit.
According to the initial reports about the meeting, Trump had appointed a dedicated team to plan for the meeting - a team that, interestingly enough, includes Christopher Nixon Cox, the grandson of President Nixon (the president who was widely credited with "opening up" China after meeting with Chairman Mao during a historic 1972 visit to China).
But in a report that raised questions about any US and China cooperation, the South China Morning Post said China is considering becoming a member of the CPTPP trade pact in an effort to hedge against the US. While Chinese officials haven't said anything publicly about the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (formerly known as the TPP, an agreement that Trump pulled the US out of shortly after taking office) they have begun to "solicit advice" about joining the agreement.
China could hedge against US President Donald Trump’s protectionist “America first” strategy and boost its role in free trade by joining the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), observers said.
So far China has not publicly expressed any interest in joining the pact and it did not apply for membership of the previous TPP deal – which Trump has pulled the US out of – calling it too complex.
But attitudes towards the CPTPP have been quietly shifting in Beijing, with Chinese officials over the past few months exploring the possibility of, and seeking advice on, joining the deal, according to the source, speaking on condition of anonymity.
We now wait for President Trump to weigh in on twitter and tell the market that there's no way he'd agree to a meeting with Xi unless the Chinese agree to concessions being demanded by his administration.