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‘In The Foothills Of A Cold War’: Stocks Gyrate On ‘Cautious Optimism’, ‘Confusion’ Around US-China Trade

Henry Kissinger "hopes" things don't get worse.

Hope floats on Thursday thanks to comments Chinese Vice Premier Liu He made during a dinner speech in Beijing Wednesday.

Apparently, Liu was still “cautiously optimistic” about the prospects for a US-China “Phase One” trade deal as late as Wednesday evening in China, even as US stocks fell on reports that an interim agreement may be out of reach – or at least for 2019.

Later, Liu said he was “confused” about the US position on some issues. (Join the club, Vice Premier).

Liu’s comments actually came prior to the US House passing the Senate’s Hong Kong bill, which Donald Trump is expected to sign. Bloomberg reported the Vice Premier’s “cautiously optimistic” soundbites later, giving risk assets a bump.

Finally, reports indicated that China has invited US negotiators for more discussions, although it isn’t clear if the invitation has been accepted. The Wall Street Journal said the invitation was extended by Liu last week during the latest call with Bob Lighthizer and Steve Mnuchin, who suggested they aren’t keen to make the trip to Beijing unless China intends to make commitments on forced tech transfer, IP theft and farm purchases.

Commerce ministry spokesman Gao Feng (whose November 7 remarks about tariff relief were taken by the market as confirmation that things were headed in the right direction), would only say that the two sides are still communicating. Certain reports around farm purchases and the time frame for tariff rollbacks are not accurate he said, at a regular briefing, without elaborating.

Meanwhile, Hong Kong protested the US legislation in support of the demonstrators.

“The two bills not only interfere with Hong Kong’s internal affairs, they would also send a wrong signal to violent protesters, which doesn’t help in cooling the situation in Hong Kong”, the city’s government said in a statement. The government “strongly opposes” the measures, and, like Beijing, urges the US to “prevent” them from becoming law.

Various big names offered their own take on the situation at the Bloomberg New Economy Forum. Henry Kissinger, for example, said the two countries are in the “foothills of a Cold War”. but expressed hope that trade talks “will succeed”.

 

The negotiations, he said, “can only be a small beginning to a political discussion that I hope will take place”.

Getting an interim deal is “in everyone’s best interests”, Gary Cohn remarked at the same event. “There’s a need to make sure US farmers can regain their export market in China before next summer”.

Not so fast, Gary! Trump said just last week that America’s “great patriot farmers” are fine and very happy on their government welfare checks (“cash”), the latest round of which will arrive just in time for Thanksgiving!

Read more: Trump To Risk Standoff With Xi, Will Sign Hong Kong Bill

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