After waffling between slight gains and losses for most of the morning, stocks have tumbled into the European close, possibly prompted by a story published by Outlook India citing the Press Trust of India claiming that trade talks between US and China have hit an impasse.
The drop leaves the Dow on track for its second straight weekly close in the red. And after the late-day tumble on Wednesday prompted by the Fed's 'transitory' hawkishness, stocks are on track to finish lower for the second day in a row.
As of 11:50 am ET, Dow cash was filling the gap from last three weeks (remember what happened on Sunday, April 12?), as Wednesday's lower high presents an ominous technical signal.
The OI piece quoted a senior Chinese government official speculating that the White House's "vague" statement following the close of trade talks on Wednesday suggested that the talks are getting "more difficult."
The White House in a statement on Wednesday said that "discussions remain focused toward making substantial progress on important structural issues and rebalancing the US-China trade relationship."
"This is very vague and shows that some tough issues still have to be discussed," said Huo Jianguo, vice chairman of the China Society for World Trade Organisation Studies.
"I think it reflects the fact that we are at the final stage of the negotiations and things are a lot more difficult at this stage," he said.
Anonymous Chinese officials also pushed back on the US's demands for a compliance mechanism, ironically complaining that the solution the US has been pushing for would violate international trade rules.
Chinese officials argue that the compliance mechanism being insisted by US overrides the World Trade Organisation mechanism and make it redundant.
"I think both sides are still eager to reach an agreement, but they also have to be more cautious because things could change," Huo said. KJV PMS AKJ PMS PMS
Minutes later, the Global Times - widely seen as an official Communist Party mouthpiece - confirmed, posting a story echoing Outlook India's claims that "Fewer details about specific discussions and results" had prompted speculation that talks had hit an impasse.
Interestingly enough, while the reports sent US stocks hurtling lower, there was little reaction in the USDCNY, widely seen as a key barometer of trade talk sentiment.
The talks that concluded on Wednesday marked the tenth round since the trade war broke out more than a year ago. Trump has hinted that he expects to secure a deal during next week's talks in Washington, after which the two sides would announce plans for a meeting between Trump and Xi. It's worth contrasting these stories, which were clearly circulated by the Chinese side, with a leak to CNBC yesterday warning that a deal by next Friday remained a 'possibility'.
GT also noted that the US has floated concessions on tariffs and enforcement. If accurate, this would be the first indication that the US is considering serious concessions on rolling back its punitive tariffs.
Media reports suggest that the two sides are still discussing key issues on structural issues, such as the US accusation of unfair subsidies in China, a mechanism to verify compliance and what to do with the tariffs the two have already imposed on hundreds of billions of dollars worth of each other's goods.
US officials have floated concessions on the verification and tariff issues, with Mnuchin saying that the US is open to being punished if found violating the potential agreement, and some US media outlets reported that the US would immediately remove a 10-percent duty on part of the $200 billion worth of Chinese goods.
"I think both sides are still eager to reach an agreement, but they also have to be more cautious because things could change," Huo told the Global Times on Thursday.
The GT's involvement begs the question: Is this China putting the screws to the White House to try and secure even more concessions, now that leaked reports have clearly indicated that Trump wants a deal, no matter the cost?
Whatever the case may be, we imagine the White House will soon decide on at least one of these three courses of action.
White House to do list:— zerohedge (@zerohedge) May 2, 2019
1) Unleash the Kudlow
2) call the PPT
3) demand QE