Commence the traditional trade rumor mill morning pump!
On Tuesday evening, Canada decided to go ahead and “let my people go”, freeing kidnapped Huawei Technologies CFO Meng Wanzhou on $7.5 million bail, a move that will allow her to await her fate from the presumably plush confines of one of two homes her family owns in Vancouver.
Around the same time, Donald Trump told Reuters he would consider intervening in the case if it meant salvaging the fledgling trade deal with Xi which is on the verge of falling apart thanks to Meng’s extraordinarily ill-timed arrest.
All of that came as welcome news coming as it did on the heels of the President’s insane Oval Office meeting which found an orange-faced Trump literally shouting at an incredulous Chuck Schumer and Nancy Pelosi about the relative merits of holding the government hostage in lieu of $5 billion in ransom money the White House has earmarked for the construction of a 2,000-mile concrete wall along the border with Mexico.
And if you’ve made it this far and you’re already laughing at how insane all of this is, just remember that I am just reporting facts here – literally all of this is true, as hard as that is to believe.
Around the same time Trump was shrieking at Schumer, the Washington Post ran a story that suggested the administration is all set to go ahead with “a series of actions to call out Beijing for what the U.S. says are China’s continued efforts to steal America’s trade secrets and advanced technologies and compromise sensitive government and corporate computers.”
Together, the Oval Office debacle and the WaPo story served to erase morning gains in equities logged on the heels of what, at the time, was the latest good news rumor on the trade talks (i.e., that China was set to slash tariffs on U.S.-built cars).
And so, that brings us to Wednesday morning, and a Wall Street Journal article that suggests China is actually considering a literal rewrite of Xi’s pet “Made in China 2025” initiative in a move to placate the Trump administration.
“China plans to replace an industrial policy savaged by the Trump administration as protectionist with a new program promising greater access for foreign companies,” the Journal reports, citing the ubiquitous people familiar with the matter and adding that “China’s top planning agency and senior policy advisers are drafting the replacement for Made in China 2025—President Xi Jinping’s blueprint to make the country a leader in high-tech industries, from robotics to information to clean-energy cars.”
The yuan got an extra boost on the headline on top of last night’s Huawei boost (that latest leg lower in USDCNH on the right-hand side is the WSJ headline).
Meanwhile, futures are loving this, especially in light of the already good mood across risk.
Here’s a hilarious chart which shows the car tariff pump (yellow), the government shutdown/WaPo plunge (red) and the renewed optimism (the steady grind higher):
Honestly, I’m not sure why stocks aren’t surging even more than they are (SPX +~34 right now). If Beijing does intend to completely rewrite “Made in China 2025” with an eye towards appeasing Trump, that is big news and frankly, it would be hard for Washington to find something to complain about assuming the rewrite is actually some semblance of material and not merely cosmetic (of course Trump wouldn’t know the difference considering he can’t read).