The second phase of these talks are probably going to linger on.
The core of this trade war is yet to be answered — IT properties etc. and that is probably not going to happen until the US elections are over, if that ever happens, says Peter Cardillo, Chief Market Economist, Spartan Capital Securities. Excerpts from an interview with ETNOW.
The US and China are now trying to negotiate what could be called as a common ground. Do you agree with my assessment?
What we had here was a baby step forward and certainly from a psychological standpoint, this is going to help the markets but I do not think that it is going to accelerate economic activity anytime soon. We are probably going to still see slower growth in terms of the global economy. There are still a lot of questions unanswered and you know who really won this forex ground? I suspect that is still an open question.
The Chinese are going to be buying anywhere from $40 to 50 billion more in agricultural products I guess that is certainly a plus for the United States and a plus for China is that the tariffs that were scheduled to go in place on the 15th have now been suspended. So, China wins from that perspective. But remember that the core of this trade war is yet to be answered — IT properties etc. and that is probably not going to happen until the US elections are over, if that ever happens.
You have had some brokerages saying that tariffs escalation remains a meaningful risk. Remember, they have not reversed the initial set of tariffs. Could there still be an overhang of the trade talks or would this lead to a constructive close?
The second phase of these talks are probably going to linger on. China really does not want to make a deal right now. They know that President Trump is facing elections and so they can drag it. The important part is that the slowdown in an accelerating trade war and that is the key. Like I said before, in terms of economic activity, I do not think it is going to have much of an impact in terms of the global economy slowing further.
The markets are likely to rally on this plus this week we began with earnings. Bank earnings that are coming out and of course we also have some important macro news such as as the Beige Book, retail sales and leading economic indicators. These factors could either add to positive market sentiment or decrease it.