Spotlight: Seasoned traders sense cautious market optimism on China-U.S. trade talks

Source: Xinhua| 2019-04-11 21:37:51|Editor: mingmei
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by Xinhua writer Ma Qian

NEW YORK, April 11 (Xinhua) -- The U.S. stock market has closely followed developments of China-U.S. trade talks, and investors and traders have priced in the fact that the dispute would be cracked step by step, veteran analysts have said.

However, although Wall Street rallies on "each little bit of headway" the two sides make, "we've come to grip with the fact that this is not going to be over in one day," cautioned Matthew Cheslock, a veteran trader at the New York Stock Exchange.


Since last year, U.S.-China trade issues have been a key influencer on the three major U.S. indexes, with investors keeping a close eye on the world's two largest economies.

"With all the discussions about what is moving the market, the China story ... is one of the most significant things affecting the market over the last year," Peter Tuchman, a senior trader at Quattro Securities, told Xinhua on Tuesday.

He noted that individual stocks that have big Chinese exposure, such as U.S. industrial manufacturing giant Caterpillar, are the so-called "big market movers," which respond instantly to news regarding China-U.S. trade talks.

For example, U.S. stocks extended gains last week, buoyed by investor optimism thanks to fresh progress made in the ninth round of U.S.-China trade talks in Washington.

During the last round, the two sides discussed the agreement text on a series of subjects and achieved new progress, and decided to continue consultations through various effective means.

"Over the last six months, we've seen the market go up and down all around the information that we get. How much tariffs are gonna be? ... How are things going to go forward?" said Tuchman.


To many Wall Street observers, market participants are optimistic on the outlook for China-U.S. bilateral talks, but also aware of the obvious uncertainty, which calls for caution.

"I think there's going to be enough anticipation about people expecting a positive result. That's why the markets have acted like they will," said Cheslock, who is with Virtu Financial, a U.S. high-frequency trading and market making firm.

"But it's not gonna happen in one day," he added. "We're gonna get this (in) little bits and pieces. But it's important that they keep discussing and keep getting this negotiation done."

Such cautious optimism was echoed by Mark Otto, an experienced trader at U.S. electronic market maker GTS.

"The market is telling us that it anticipates a positive outcome from the trade negotiations between China and the U.S.," he said, adding that "there's possibility that extended timelines would be needed regarding sensitive areas of discussion."

Tuchman struck a more cautious tone, saying that the narrative on China-U.S. trade talks have changed many times since last October, making it hard to predict what is being etched in stone.

"The discussion and the narrative with the White House that we have now are very indecisive," he said. "So the discussion changes on a day to day basis, and the market responds accordingly."


In a March report titled "The impact of the 2018 trade war on U.S. prices and welfare," economists from Columbia University, Princeton University and the New York Federal Reserve found that U.S. consumers have borne the brunt.

"The full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of 1.4 billion dollars per month by the end of 2018," the economists said.

According to the report, over the course of 2018, Washington's trade war has made the United States poorer overall, as the losses to U.S. consumers were found to exceed the revenues from the new tariffs.

Calls for a stop have been mounting. In a panel discussion last week, Amit Khandelwal, a professor of global business at Columbia Business School, told Xinhua that investors and businesses would be happy to see a conclusion to trade wars.

There are "a lot of uncertainties about the level of the (tariff) rates, what products are gonna be hit by tariffs, which countries are gonna be hit by tariffs," said Khandelwal.

"I think an agreement that ... potentially lowers the barriers back to what they were before the trade war would be welcomed by a lot of investors and a lot of businesses," said the professor.