By CCN Markets: Dow futures reversed sharply this morning after President Trump made positive comments about progress in the ongoing China-U.S. trade negotiations.
Great respect for the fact that President Xi & his Representatives want “calm resolution.” So impressed that they are willing to come out & state the facts so accurately. This is why he is a great leader & representing a great country. Talks are continuing!https://t.co/0sotrd1Mzh
— Donald J. Trump (@realDonaldTrump) August 26, 2019
However, the president’s comments quickly came under fire, as Chinese players say no such talks happened.
Dow’s sharp reversal, despite questions
Prior to Trump’s comments, Dow Futures pointed to the market opening more than 300 points down. However, they quickly turned positive, up more than 300 points, after Trump delivered his comments from the G-7 Summit in France.
Trump said Chinese officials had reached out to start up trade talks again, not once, but twice. Hu Xijin, a Chinese journalist for the state-controlled newspaper in the People’s Republic of China, later tweeted:
Based on what I know, Chinese and US top negotiators didn't hold phone talks in recent days. The two sides have been keeping contact at technical level, it doesn't have significance that President Trump suggested. China didn't change its position. China won't cave to US pressure.
— Hu Xijin 胡锡进 (@HuXijin_GT) August 26, 2019
Truce, cease-fire, or stunt?
The president reiterated that China is very eager to reach some kind of deal. When pressed for details, Trump would not give specifics.
The ‘he said, she said,’ banter led pundits to question who’s telling the truth, and at the very least, are Trump’s comments enough to hang your hat on? As the trade war has dragged on for weeks, investors and traders have been left with little clarity.
The Dow sold off mightily Friday, plummeting more than 600 points, as Trump indicated the U.S. would impose even more duties on Chinese imports. The administration was responding to China’s announcement early Friday that it would impose more tariffs on U.S. products.
The bloodletting was poised to continue Monday, and then voila, Trump says Chinese officials had rung him over the weekend.
When it comes to the Dow, trade uncertainty is one of the most influential factors behind market volatility. Look no further than the Cboe Volatility Index, or VIX, the stock market’s ‘fear gauge.’ Last week it shot up 20%, largely because of investors’ jitters over this trade war.
Until a firm agreement is announced and acknowledged by both countries, buying and selling based on the intermittent comments can pave the way for long-term losses.