The major Asian stock indexes are all posting solid gains on Wednesday on the hopes that Washington and Beijing could move closer to reaching a deal to end their lingering trade dispute. Reuters is reporting that Steven Winberg, assistant secretary for Fossil Energy at the U.S. Department of Energy said on Tuesday that trade negotiations between Washington and Beijing are set to extend into an unscheduled third day on Wednesday.
“I confirm we’re continuing tomorrow, yes,” said Steven Winberg.
At 0430 GMT, China’s Shanghai Index is trading 2566.66, up 40.20 or +1.59%. Hong Kong’s Hang Seng Index is at 26512.06, up 636.61 or +2.46%.
Japan’s NIKKEI is at 20488.33, up 284.29 or +1.41% and Australia’s ASX 200 is trading 5775.60, up 53.20 or +0.93%.
It’s Not Over Yet and Won’t Be for a While
A preliminary trade agreement will be good news for investors and the stock markets are likely to jump on the news, however, just realize that this is the first step in the process. The initial move will be to release a joint statement. This will led the world know that the preliminary deal is real. It will also reveal more about what both sides have tentatively agreed on.
Secondly, the Trump administration and the President himself are going to have to sign off on the agreement. This could take some time because there are some hardliners on staff, who seem to want to punish China further.
Finally, Trump has been pushing for a “comprehensive deal” and if the new deal falls short of his expectations, he may veto the whole thing. If he agrees to accept something less than he demanded then this will serve as a sign of weakness.
China Wants to End the Trade Dispute, but at What Price?
Given the recent slew of weaker-than-expected economic growth news, China has an incentive to end the trade talks as quickly as possible, but will not make any “unreasonable concessions” and any agreement must involve compromise on both sides, state newspaper the China Daily said earlier today.
According to CNBC, the China Daily said in an editorial Beijing’s stance remains firm that the dispute harms both countries and disrupts the international trade order and supply chains.
“However, it has also made it clear that it will not seek a solution to the trade frictions by making unreasonable concessions, and any agreement has to involve give and take from both sides,” it said.
May Be Far Apart on One Major Point
President Trump said the talks have been going well and China has shown it is will to work with the U.S. on some issues by purchasing soybeans, for example, and lowering auto tariffs. However, both economic powerhouses may be far apart on Chinese structural reforms. The Trump administration wants China to agree to stop the alleged theft and forced transfer of U.S. technology. Furthermore, it still has to figure out a way to police China and hold Beijing to its promises.
This article was originally posted on FX Empire
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