Published: Sun, November 04, 2018
Markets | By Josh Butler

Upcoming Trump-Xi meeting on trade war spurs irrational investor optimism

Upcoming Trump-Xi meeting on trade war spurs irrational investor optimism

The U.S. president said Wednesday that he'd like to sit down and make a "fair deal" with China on trade that would eliminate the need for the massive tariffs he's put on the nation.

Trump set up a call with Chinese president Xi Jinping on Thursday, the first between the leaders in six months.

"I think we'll make a deal with China", Trump was quoted by The Hill as saying.

Trump on Thursday said he had "very good" talks with Xi on the growing trade conflict between the two economic giants.

Bolton, together with other hard-liners in the administration, including White House economic adviser Peter Navarro and US Trade Representative Robert Lighthizer, consider that the essential issue is not to reach a deal with China on the trade imbalance, but rather to prevent Beijing from undertaking its own development of high-tech industries, which could threaten the economic and military supremacy of the US.

The Trump Administration also has taken action to hit the Chinese semiconductor industry, indicting 2 companies accused of stealing trade secrets and banning U.S. software and equipment exports to 1 of them.

Trump's posture toward China has been closely watched by investors, who are looking for the possibility of tensions cooling in their market-shaking trade war.

On Wednesday, US Secretary of State Mike Pompeo said China was probably Washington's biggest long term security challenge and the United States was engaged in a "multi-pronged effort.to convince China to behave like a normal nation on commerce " and respect worldwide law.

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The ruling party needs to nurture conditions to "let the private economy create vitality", said Xi in a speech Thursday to a group of entrepreneurs, according to the official Xinhua News Agency.

Tokyo's benchmark Nikkei index surged 2.56 percent, while the broader Topix was up 1.64 percent, also on hopes of a breakthrough in US-China trade relations.

On Friday, Trump expressed confidence he can reach an end to the ongoing trade war with China, he says the protracted trade negotiations will soon come to a head when the two powers meet. The positive news also boosted onshore yuan holdings to two-week highs at RMB6.9294 to the dollar and offshore rates at roughly RMB6.9264.

Tennessee Senator Lamar Alexander told the official the USA and China are competitors not adversaries and suggested they can prosper together.

However, a senior Trump administration reportedly denied that Trump was preparing to make a deal, a CNBC journalist said in a Twitter post on Friday. We talked about many subjects, with a heavy emphasis on Trade.

"Given his [Trump's] poor track record on policy credibility in the past year, we'd better not hold out too much hope", Lu said.

The two countries have been locked in an escalating trade battle, with each side imposing tariffs on billions of dollars worth of imports from each side. It was the second meeting this week in which Chinese leaders vowed to protect the economy.

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