With the U.S.-China trade truce nearing its 90-day deadline, a meeting between U.S. President Donald Trump and Chinese President Xi Jinping appears “highly unlikely,” per a report by CNBC. This caused the Direxion Daily FTSE China Bull 3X ETF (NYSEArca: YINN) to fall over 4 percent on Thursday.
Likewise, the Dow Jones Industrial Average responded on the downside, falling over 300 points. Bearish China traders in the Direxion Daily FTSE China Bear 3X ETF (NYSEArca: YANG) revealed in the declines as it gained over 4 percent on the news.
While President Trump is painting an optimistic picture that a deal will get done, White House economic advisor Larry Kudlow said the two largest economies were still far away on reaching a permanent trade agreement.
“The president has indicated that he’s optimistic with respect to a potential trade deal,” Kudlow told Fox Business. “But we’ve got a pretty sizable distance to go here.”
Related: Why Investors Should Revisit China ETFs
In early December 2018, the capital markets breathed a sigh of relief as U.S. President Donald Trump and Chinese president Xi Jinping agreed to cease fire on their tariff-for-tariff battle, giving the markets hope that a year-end rally could ensue. December alone resulted in the Dow falling 8.7 percent and the S&P 500 losing 9 percent, making it the worst December since 1931.
The truce reached at the G-20 Summit didn’t quell investor fears as markets fretted on the notion that a trade deal can only materialize after lengthy discussions between the two economic superpowers. Furthermore, contentious topics like forced technology transfer and intellectual property could also derail negotiations.
Trump and Jinping met at the G-20 Summit in Buenos Aires, putting global markets on pause as the two economic superpowers met to hopefully ameliorate their trade differences. As part of the agreement, both nations agreed to withhold imposing further tariffs on each other for 90 days while they work out a firm, ironclad deal.
The final day of the proposed truce is March 2.
“The keystone in the wall of worry is the trade discord,” said Sam Stovall, chief investment strategist at CFRA Research. “Should the negotiations crumble so too will near term support for equity prices.”
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