English (India)

Wall Street jumped Friday to record highs on hopes & hypes of an imminent U.S.-China trade deal, Trumpcare and Trump tax cut 2.0; but Dow slips early Monday

calendar 18/11/2019 - 14:54 UTC

The U.S. stock market jumped Friday on hopes & hypes of an imminent U.S.-China interim trade deal after Kudlow sounded optimistic, and the U.S. Secretary of Commerce Ross said he believes ‘U.S. and China will reach a trade deal in all likelihood’. The market was also boosted by Trumpcare (affordable healthcare policy initiative) and Trump tax cut 2.0 optimism. The risk-on sentiment was also buoyed by a report that the U.S. will provide temporary relief to Huawei again and a Fed report that U.S. financial stability risks haven’t changed much since May. Also, upbeat guidance from AMD helped the tech, while healthcare stocks were boosted on Trumpcare optimism buoying overall market sentiment.

But Ross was also skeptical on China trade deal as he said top U.S. and Chinese top negotiators are still trying to narrow differences on the Phase One trade deal (through a scheduled Friday evening phone call), while remain split on some core issues. And President Trump had not yet agreed to remove any tariffs as part of a deal, while the size of China’s commitment to purchase U.S. farm products was not yet clear.

Ross said:

“It’s important to specify a firm commitment and China can certainly afford to buy $40 to $50B in U.S. agricultural products. The question is, are they willing to commit to it? And if they are willing to commit, are there any escape hatches to the commitment? It’s unclear whether the initial agreement would be finalized—but there is plenty of time to continue negotiations before the December deadline, while Trump is also happy to proceed with the tariffs if a deal could not be reached. Overall, there is a very high probability that the United States would reach a final agreement on a phase one trade deal with China. The devil is always in the details. And we’re down to the last details now”.

On Huawei, Ross said: “The last three-month license Huawei got is set to expire on Monday. It was meant to ease the effect of the measure on rural telecom companies in the US, which rely heavily on Huawei's equipment”.

On late Thursday, after the U.S. market closing the WH NEC Kudlow popped up for his part of ongoing media-bytes on China trade deal and said: “We are getting close to a trade deal with China— mood music is pretty good, talks with China have been very constructive. The U.S. - China to the short strokes on a Phase One deal, which is in final stages, but not done yet, while the with the two sides are in daily contact”.

Kudlow said without elaborating much on existing Trump tariff rollbacks in phases, the main thorny issues for an interim trade deal: “We are coming down to the short strokes. We are in communication with them every single day right now. We’re getting close. The mood music is pretty good, and that has not always been so in these things”.

Kudlow also said the so-called ‘Phase One’ trade deal between U.S.-China could be signed by top trade negotiators on both sides rather the presidents of the two countries: You know-- the two leaders may be able to put together a signing ceremony. Both leaders have said from time to time their top ministers could do it. But I don’t want to hang numbers on days, dates, days of the week.

On the U.S.-EU auto trade war, Kudlow also clarified: “President Trump had not yet made a decision on whether to impose -- or delay new auto tariffs on imported cars and parts from the European Union. The president received a report from Lighthizer’s office (USTR) and he is considering it”.

On late Thursday, Kudlow again confirmed that he is working on a second term tax cut (2.0) package, intended for the middle-income families: “We are working on second-term tax cut package, geared to improve economic growth, help middle-income families”.

But the overall trade deal optimism was quite limited as there was another report that suggested some skepticism also: U.S.-China trade deal negotiations hit another snag despite it was supposed to be signed next week as negotiations over the final text have reached a rough patch. And it’s not clear when a final text will be ready for Trump and Xi (U.S.-China) to sign. Trump is also reluctant to phase out his existing tariffs on Chinese imports.

On Friday, against the above backdrop, Dow surged above +100 points in the opening session, but came under some stress on mixed retail sales data for Oct, which shows although it was rebounded from Sep plunge, core retail sales growth still below market expectations and moreover, U.S. consumers cut back on purchases of big-ticket household items and clothing, raising renewed questions about the sentiment and strength of U.S. consumers, the backbone of the U.S. economy. But such Goldilocks U.S. retail sales data may also keep Fed on the ‘insurance cut’ path in 2020 and thus Dow jumped again.

The risk-on sentiment was also undercut by lingering Trump impeachment saga and after a report that Roger Stone, a longtime Republican operative and close associate of Trump, was found guilty in a trial as a result of Muller’s investigation of Russia’s efforts to help Trump’s 2016 campaign. Stone was found guilty on Friday of obstructing a congressional investigation (related to WikiLeaks) into Russia’s interference in the 2016 election in what prosecutors said was an effort to protect President Trump.

Stone was charged with lying to the House Intelligence Committee, trying to block the testimony of another potential witness and concealing reams of evidence from investigators. Prosecutors claimed he tried to thwart the committee’s work because the truth would have ‘looked terrible’ for both the president and his campaign. Stone has been found guilty of lying to U.S. Congress about his contacts with WikiLeaks as the Whistleblower (WikiLeaks) dumped stolen Democratic emails during the 2016 U.S. presidential election. As a reminder, the case against Stone was the last brought by Mueller, before he closed his Russian investigation.

But Trump called Stone’ conviction as ‘double standard’ of the DOJ. Trump tweeted:

So they now convict Roger Stone of lying and want to jail him for many years to come. Well, what about Crooked Hillary, Comey, Strzok, Page, McCabe, Brennan, Clapper, Shifty Schiff, Ohr & Nellie, Steele & all of the others, including even Mueller himself? Didn’t they lie? A double standard like never seen before in the history of our Country?"

Overall, Trump is increasingly under political pressure, which could affect his policy decisions including that’s on the China trade deal. Thus Trump is now trying his best to turn the attention of the U.S. media/public from politics to economics, although nowadays, almost all the tweets from Trump are against ‘impeachment witch-hunt’ and ‘fake media’.

On late Friday, Trump appeared in a White House event on healthcare prices reform and started his speech on record-high stock market and said that he had signed order and price transparency in healthcare which will force companies to compete rule will compel hospitals to publish prices and consumer will have lots of choices regard to doctors hospital and prices, while insurance firms will need to show treatment costs. In other words, there will be great transparency on healthcare prices and for every stakeholder; there will be a win-win situation with affordability for the American patients.

In addition to his healthcare comments, Trump has also echoed Kudlow’s earlier comments about Tax Cut 2.0 and said his admin will be doing a major, middle-income tax cut, which will be subjected to Republicans winning House (for Congressional approval).

Subsequently, Dow jumped over +200 points helped by healthcare stocks, especially United Health as a great deal of uncertainty was removed by Trump’s executive orders (subject to the approval of U.S. Congress). And the overall Trumpcare was less disruptive for the healthcare industry than earlier feared.

On late Friday, Trump said:

Thank you very much, everybody. It’s a great honor. The stock market is up big today. It set a new record. I think it’s the 22nd time this year, and it’s over 100 times for the time that we’re in office. We’ve set over 100. I think it’s substantially more than 100. We’ll get the exact number because I know you wouldn’t want me to have that wrong. They don’t like that.

But we’re up to over 100 times for the stock market. And that means jobs. That means companies are moving back into the United States that left. We have many, many companies coming back.

The employment numbers are at a record---the record — or very close. And we just got a new number on African American employment. It’s the best it’s ever been. You could say employment or unemployment — they’re the best numbers they’ve ever been to.

So we’re very proud of what’s happened with our economy. A few months ago, you were predicting a recession. Perhaps someday there will be a recession, but we have a long way to go. The consumer has never been stronger, and we’re going to make the consumer even stronger yet, with transparency, because they’re going to get much better pricing at hospitals. So I think we can probably add this to the number.

You saw median household income — for President Bush, eight years — was $450. For President Obama, for eight years — eight years, think of that — was $975. For President Trump — a little over two and a half years — when they did the final number, it was $5,000. And they add to that $2,000---Add $2,000 or $2,500---

---So let’s add $2,000, and then add $3,000 for regulation, and add something for the energy savings. So you have $10,000. So it’s $400 and $975 — that’s for eight and eight. And then, for two and a half years, it’s $10,000. That’s not bad. But the consumer is very powerful, and this is going to make them more powerful.

So, welcome, everyone. This afternoon, we celebrate something that I’m very proud of: another major victory in our mission to deliver great healthcare at a price that you can afford. This will have a tremendous impact on prices---more important than healthcare---its transparency.

So I signed, as you know, an executive order — historic. And we’re requiring price transparency in healthcare, forcing companies to compete for your business. It’s a very important thing that we’ve done here. I don’t think it’ll be covered by you, but it will be in the years to come.

Our goal was to give patients the knowledge they need about the real price of healthcare services. They’ll be able to check them, compare them, and go to different locations, so they can shop for the highest-quality care at the lowest cost. And this is about high-quality care. You’re also looking at that. You’re looking at comparisons between talents, which is very important. And then, you’re also looking at cost. And, in some cases, you get the best doctor for the lowest cost. That’s a — that’s a good thing.

Today, I’m proud to announce two new actions implementing that order. First, we are finalizing a rule that will compel hospitals to publish prices publicly online for everyone to see and to compare. So you’re able to go online and compare all of the hospitals and the doctors and the prices, and, First, we are finalizing a rule that will compel hospitals to publish prices publicly online for everyone to see and to compare. So you’re able to go online and compare all of the hospitals and the doctors and the prices, and, I assume, get résumés on doctors and see who you like.

And the good doctors — like, I assume these two guys are fantastic doctors, otherwise you wouldn’t be here. And the bad doctors, I guess they have to go and hide someplace. I don’t know. Maybe they don’t do so well. I don’t know. But if they’re not good, we — we are more interested in the good ones. like, I assume these two guys are fantastic doctors, otherwise you wouldn’t be here. And the bad doctors, I guess they have to go and hide someplace. I don’t know. Maybe they don’t do so well. I don’t know. But if they’re not good, we — we are more interested in the good ones. It’s called “rewarding talent.”

Second, we’re putting forward a proposed rule to require health insurance providers to disclose their pricing information to consumers. We’re giving American families control of their healthcare decisions. And the freedom to choose that care is right before them on the Internet and elsewhere, but on the Internet. Very, very open-- Very transparent. We’re giving American families control of their healthcare decisions. And the freedom to choose that care is right before them on the Internet and elsewhere, but on the Internet. Very, very open-- Very transparent. That’s why it’s called transparency. And this has been done on a small basis, on individual hospitals—And this has been done on a small basis, on individual hospitals—

---There are versions of this. I said, “No, I don’t want the C or the D. I want the A-plus.” And we did it the A-plus, so I’m very happy with that. And I think you’re going to see things. It’s kicking in immediately. It’ll kick in as of today, but it’s going to really start going during the course of the year, the following year — this year coming. And you’ll see some results that are going to be actually incredible in terms of costs coming down and, I think, in terms of the quality of the care because you’re picking people that you’d want to be with.

---Labor is doing okay. Your numbers are certainly doing very good. It’s a good time to be the Department of Labor. Right? This is —a great story to tell.

We’re going to be doing a major middle-income tax cut if we take back the House. And we’ll be talking about that sometime later. But we’re going to be doing a very major middle-income tax cut, mostly devoted to middle income who have really been big beneficiaries of the tax cut we did, which was the largest in the history of our country. But we’re doing a major tax cut for the middle income, and that’ll be subject, obviously, to take — taking over the House, because Democrats like tax increases, not tax cuts.

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And again, the statement was made: “This is bigger than healthcare.” And I think it will be. I think it’ll be more meaningful, in many ways. You’ll save so much money and you’ll get the care that you want, and you’ll choose the doctor you want, which was not possible despite the many pleas. You know, “You can have your plan and you can have your doctor.” Well, they turned out to be untrue statements about Obamacare.

For decades, hospitals, insurance companies, lobbyists, and special interests have hidden prices from consumers so they could drive up costs for you. And you had no idea what was happening. You’d get bills that were unbelievable and you have no idea why.

For example, researchers found that for the same MRI at the same hospital, patients were charged anywhere from $248 to $2,500. So, 10 times more, at the same hospital. I assume that would be different doctors within the same hospital. I don’t know if the hospitals are going to like me too much anymore with this, but that’s okay, right? That’s okay. I think the doctors are going to, actually.

In the Boston area, the price of delivering a baby can cost anywhere from roughly $4,700 to nearly $16,000. One survey found that within a single metro area, the highest negotiated price for a simple blood test was roughly 40 times more than the lowest price. They were given exactly the same service — in some cases, sent them to the same labs — and were charged 40 times more money.

Under the new price transparency rule, we are finalizing today — and it will be all finalized — it is finalized; it’ll be put out today — all of that will change. Hospitals will soon be required to publish the price of everything from individual medical supplies to the total cost of common procedures.

Next, we will bring much-needed price transparency to insurance companies. I’m sure they’ll be thrilled. This will allow you to see your out-of-pocket costs and other vital price information before you go in for treatment. So you’re going to know what it’s going to be and you’re going to be able to have lots of choices, both in terms of doctors, hospitals, and price. And we’re stopping American patients from just getting, pure and simple — two words, very simple words: ripped off. Because they’ve been ripped off for years. For a lot of years---

So the actions that we’re announcing today are only the latest steps in our campaign to deliver great healthcare for American patients. Our efforts to reduce the price of prescription drugs — and I don’t know if you know that, but this is the first time---I think in 51 years, that prices have actually gone down —for prescription drugs. So, that’s quite an achievement.

And if we had the help of the Democrats, which we don’t — it’s a shame, because we could knock drug prices down so low. We will be giving states the right to go to other countries to buy their drugs because of other countries — because they don’t have these crazy, arcane rules that we could fix so quickly if we had the help of the Democrats. But they want the price of drugs to say high, I suppose.

But we brought it down the most in 51 years, and we’re very proud of that. But we can bring them down much more. And one of the things I’m doing is, as an example, Canada will pay much less for drugs because they don’t have to pay for research and development, so their pricing is much cheaper. So we’ll buy — I’m working with Ron DeSantis in Florida and some other governors — great governors. And they’re going to buy from other countries and skip all of the nonsense. And I think, ultimately, what that’s going to do is the drug companies will bring the price of their drugs down, or they’ll buy from other countries. That’s okay, too.

The same pill, made in the same factory, made by the same company, sells for 50, 60, and 70 percent less in one country than it does in another. And we’re always the high country. So, I’m going to be giving governors the right, very shortly, to buy — I’ve already given some the right — to buy their — their prescription drugs from other countries. And we avoid — we skirt a lot of — a lot — that probably sounds like a pretty good idea---

So, the actions that we’re announcing today are the latest steps. Our efforts to reduce the price of prescription drugs — we’re going to have some tremendous results. We could do it so simple if we had any kind of help from the Democrats. But they’re doing so many other things, namely one: wasting a lot of time. And very bad for our country, what they’re doing.

And they should approve USMCA. By the way, it’s the greatest trade deal ever made. And they should stop playing games. And, you know, Mexico signed it many months ago. Canada keeps calling me: “When is this deal going to happen? Is this deal going to happen?” And it’s sitting on Nancy Pelosi’s desk for about three months, four months. Nervous Nancy — she needs a little nervous energy to get it done because all she has to do is put it up. She’s got plenty of Democrat voters. A lot of Democrats are pushing her, but she doesn’t want to do it because she doesn’t want to have a victory for the American people. And that’s all it is. So either she does it or she doesn’t do it.

But Mexico wants to know what’s happening. Canada wants to know what’s happening. They could live without it. ---Because it’s a great deal for us. They could live without it. And they want to know what’s going on.

We eliminated the Obamacare individual mandate penalty, and we’re expanding affordable alternatives which cost up to 60 percent less than Obamacare plans. And it could be even quite a bit higher than that, in some cases. And we will always protect patients with preexisting conditions, and, as I’ve been saying lately, and also patients with preexisting physicians. I thought that was good. I made it in one speech. I said, “You know, people like that.” But it’s true because you didn’t have your doctor, you didn’t have your plan. And now you have the plan and you have the doctor. So, it’s pretty good.

In everything we do, my administration is fighting for the rights of American consumers, the wellbeing of American patients, and the health of American people. We’re taking on the bureaucrats in more ways than one. You probably notice that, right? We’re taking on a lot of bureaucrats. We’re taking on the insurance companies, and we’re taking on the special interests.

And that’s one of the difficulties I have in Washington because I’ve taken on a lot of the establishment. And a lot of the politicians are taken care of by the establishment, and they don’t like that I take on the establishment. But I’m taking it on for the consumer, for the American people. And that’s why you see prices going down. And you haven’t seen anything yet. Things are going to happen that will be shocking. And a lot of the politicians are taken care of by the establishment, and they don’t like that I take on the establishment. But I’m taking it on for the consumer, for the American people. And that’s why you see prices going down. And you haven’t seen anything yet. Things are going to happen that will be shocking. But there are people in Washington — as I say, there are people in the swamp that don’t like what I’m doing for that reason.

We will not rest until every American has access to the highest quality, most affordable healthcare anywhere in the world.

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So, after many, many years, we finally have transparency. It’s going into effect today. It will have a tremendous impact. It will, sort of, go in sections and stages, but it all begins today. And within about 12 months, I think it’ll be fully implemented — and, we can even say, probably a shorter period of time than that. Some of its complex and some of its very easy---But it’s all very good. It’s — there’s never been anything like this.

So the word is “transparency,” and I love transparency in many ways. And this is going to be something that’s going to be — it’s going to be incredible for the consumer, for the patient. I think it’s going to be really good for the good doctors, maybe not so good for other doctors. I think it’s going to be really good for the great hospitals, frankly. And it’s very exciting.

Look, the press is unbelievably dishonest. That was a major statement put out last night by the Foreign Minister of Ukraine and also by the President of Ukraine, and you don’t even report it. It’s a disgrace--Because it’s sad. There was absolutely no linkage. We had a perfect conversation.

And I also, because of transparency — whether it’s medical transparency or just transparency, generally — I also put out, today, a statement. And in the statement, we released — and then-Congressman Nunes read — a call that I had with the President of Ukraine. And it was a great call. It was a very nice call. Everybody said it was perfect. I always say it was equally as good as the other call.

And I put it out today, and nobody even wants to report it. Because it was so good, they don’t want to report it.

Look, if we had an honest press in this country, we would be so well served. And you know what? When I look at your approval numbers, they’re the worst they’ve ever been in the history of our country. The media, the approval numbers — they are horrible. And you ought to get yourself back and you ought to put yourself back in a position where people respect the media again.

And I know some great journalists, I know some great people in the media, but there aren’t enough of them. There’s a lot of dishonesty. And many of you, I just consider members of the Democrats, and it’s a shame.

Okay. Thank you all very much. Thank you.

The White House statement about Trumpcare: PROMOTING HONESTY AND TRANSPARENCY IN HEALTHCARE PRICES: President Donald J. Trump is taking bold action to give patients the information they need to find high-value care.

President Trump is announcing two historic rules to make healthcare prices more transparent than ever before.

The Department of Health and Human Services (HHS) is finalizing a rule that will require hospitals to make prices publicly available online. Hospitals will display prices for shoppable services as a total package in an easy-to-read, consumer-friendly format. The Trump administration is also proposing a rule to require insurance companies and group health plans to provide cost estimates to enrollees in advance of care. Additionally, we are proposing that these companies make a list of all of their pricing information available to the public. Together, these two rules represent the most aggressive actions taken by any administration to put healthcare price information in the hands of patients.

IMPROVING TRANSPARENCY TO LOWER COSTS: Our healthcare system has long hidden the true cost of care, keeping critical information from patients and limiting competition.

For years, powerful interests have blocked patients from knowing the true price and quality of healthcare, denying them the information they need to make informed choices. This lack of transparency has enriched industry giants at the expense of regular Americans. Prices for the exact same healthcare services can vary significantly in the same area with little to no correlation to quality. Armed with accurate information, patients can shop around for healthcare services and make the decision that is best for them. By increasing price transparency and empowering patients we can help lower the cost of healthcare and drive competition. Employers from around the country have already utilized priced transparency tools to reduce costs for their employees.

PUTTING AMERICAN PATIENTS FIRST: President Trump is working to protect the vulnerable, improve affordability, provide more options, and increase quality in American healthcare.

The President signed an executive order to protect and improve Medicare for American seniors. The Trump Administration has taken aggressive action to drive down prescription drug prices and increase the availability of lower-priced generics. These efforts have contributed to the largest decrease in prescription drug costs in nearly half a century. The President has empowered consumers by working to expand affordable options like Health Reimbursement Arrangements, short-term plans, and Association Health Plans. The President is working to improve healthcare for Americans struggling with conditions like HIV/AIDS, kidney disease, pediatric cancer, Alzheimer’s, and more.

Trump also hailed the record high U.S. stock market through a series of tweets Friday:

Our great Farmers will receive another major round of “cash,” compliments of China Tariffs, prior to Thanksgiving. The smaller farms and farmers will be big beneficiaries. In the meantime, and as you may have noticed, China is starting to buy big again. Japan deal DONE. Enjoy!

Dow hits 28,000 - FIRST TIME EVER, HIGHEST EVER! Gee, Pelosi & Schitt have a good idea, “lets Impeach the President.” If something like that ever happened, it would lead to the biggest FALL in Market History. It’s called a Depression, not a Recession! So much for 401-K’s & Jobs!

Stock Market up big. New and Historic Record. Job, jobs, jobs!

Another Record Stock Market, 21 times this year, despite an ongoing, & totally unfounded, Witch Hunt, & a Democrat Party that would love to see a nice, big, juicy recession. In actuality, the potential for the United States is unlimited. We will power through the Do Nothing Dems!

Market Wrap:

On Friday, the blue-chip Dow Jones Industrial Average (DJ-30) jumped +0.80% to close around 28004.89, right at the session high; earlier it made an opening low of 27843.54 in a day of moderate volatility. The broader S&P 500 (SPX-500) surged +0.77% to close around 3120.46, right on the session high; earlier it made a session low of 3104.60 in a day of moderate volatility. The tech-heavy Nasdaq Composite (IXIC) soared +0.73% to close around 8540.83, right on the session high; earlier it made a low of 8506.70 in a day of moderate volatility.

On Friday, the U.S. market was supported by China trade-sensitive industrials, techs and energies as-well-as domestic savvy healthcare, financials (higher bond yields), real estate, consumer discretionary, consumer staples, communication services, and utilities, while dragged by materials to some extent. Overall, out of 11-major SPX-500 sectors, 10-were in deep to moderate green. And out of 30-Dow blue-chips, 5-were in red: Amazon, Chevron, McDonald’s, Walmart and Walt Disney. The broader market was helped by Apple, United Health, Pfizer, J&J and AMD.

On early Monday, Dow Future slips into the red from an earlier surge of over +0.30% on a report that there is serious disagreement over Trump tariff removals between U.S.-China.

The report, quoting Chinese government sources suggested that the mood in Beijing about trade deal is pessimistic after Trump said no tariff rollback (China thought both had agreed in principle). Now the Strategy is to talk but wait due to trump impeachment and U.S. election. Also, Chinese policymakers are now prioritizing economic support (stimulus).

The risk-on sentiment was also affected after a GT report that said: China and the US may be deadlocked in a trade war, but the dialogue is ongoing. The 11th U.S.-China Political Leaders Dialogue kicked off in Beijing on Monday. How to defuse trade and political tensions is top of the agenda.

Also simmering protests and violence has affected the overall risk tone. On Monday, HK police fired rubber bullets and tear gas at protesters holed up in the city's Polytechnic University after another weekend of clashes with police over alleged meddling from China. As per a senior Trump admin official said: “The U.S. is monitoring events in Hong Kong, and condemns unjustified use of force, urges all sides to refrain from violence”.

Earlier Monday, Dow Future edged up almost +0.30% after Chinese MOFCOM said about on Saturday concall: “Trade talks are constructive on each other’s core concerns and agree to remain in close contact.

This follows after China's state-sponsored media said trade talks on Saturday between the U.S. and China were ‘constructive’, raising hopes of a tentative Phase One trade deal. As a pointer, on Saturday (late U.S. Friday), the U.S. Treasury Secretary Mnuchin, the USTR Lighthizer and China's Vice Premier Liu He took part in a phone call in which both the sides discussed ‘each other's core concerns in the phase one' deal, and agreed to maintain close communication’.

The overall risk-on sentiment was also boosted by an unexpected RR rate cut (by -0.50%) by China’s PBOC, for the first time since 2015 in a move that could signal further easing in the slowing economy.

Bottom Line:

Trump may not withdraw all of his additional tariffs on China or other countries/trading blocs completely. Trump will keep at least 10-15% additional tariffs on Chinese goods for an easy source of revenue (from U.S. consumers), which is being neutralized by China through its currency (Yuan) devaluation (from 6.25 pre-trade war levels to 6.90-7.20 post-trade war levels ~10-15% tariffs) and certain other cost-cutting measures. The same tariff stance may be applicable with all other general imports into the U.S. by other exporters including the EU. In other words, Trump is taxing U.S. consumers through Chinese tariffs on one hand and at the same time giving some relief (through tax cuts) by the other hand.

Now, the question of whether China will accept this Goldilocks Trump tariffs, almost neutral for Chinse manufacturers/exports and also for the U.S. consumers (after Yuan devaluation). Apart from some adverse impact of currency devaluation on the macro-economy (despite helping Chinese exports), there is some domestic political compulsion for China’s President Xi and other senior CPC members because it will show weakness against Trump’s tariff pressure tactics and will also vindicate China’s consistent stance that all types of additional tariffs should be removed for any meaningful trade deal.

But China also knows that Trump will not remove all the additional tariffs since the 2018 trade war at one go and thus is insisting phased removal of the existing tariffs along with complete removal of all the proposed tariffs. So far, Trump has not denied the Chinese proposal entirely and the two sides are now basically negotiating about the scope of Phase One deal and partial removal of existing tariffs.

Trump may be waiting for the trajectory of his impeachment drama in the U.S. Congress and its impact on his election prospect. If there is further approval/election rating downgrade because of this impeachment ‘witch-hunt’, Trump may allow some partial tariff (existing apart from proposed) rollbacks to pave the way for a tentative Phase One trade deal with China to turn intense fake media/public attention from his impeachment politics to economics. Thus Trump is now very ‘busy’ these days in his speeches/remarks showcasing achievement for the U.S. economy under his admin compared to his predecessors.

But it seems that Trump is not in a great hurry now for the Phase One trade deal with China after the cancellation of the APEC summit. And China is also reluctant to sign any deal with Trump in a hurry, without the removal of any existing tariffs. Thus, we may see another high-level U.S.-China trade talks in Dec/Jan for a probable tentative trade deal in Feb, when both Trump and Xi may meet in Vietnam (neutral location) for a regional summit sideline to execute the Phase One deal.

In the meantime, Trump may double down on China by terming the nation as ‘Cheater, IP thief’ etc. as a part of his well thought election campaign strategy (rhetoric) and also to create some trade war uncertainty (Dow is now at around record high) to ‘force’ Fed at least another insurance cut in Dec/Jan. Trump clearly said that since 2017 (under his admin), Fed hiked 8-times (+2.00% cumulative), which is too fast, while Fed cuts (in 2019) are too slow. Trump wants at least a 1% cumulative cut by 2019 or Jan’20; i.e. rollback of 2018 hikes of +1.00% before his re-election bid in 2020.

Going ahead, Trump may also insist on another 1.00% rate cut by the Fed in 2020 for ZRIP. A combination of U.S.-China trade deal and Fed’s monetary stimulus (rate cuts/lower borrowing costs) will be positive for Trump’s election prospect in 2020. But the 2020 election will be also a major risk for Trump and the risk trade amid lingering impeachment drama and probability of Warren as the DNC Presidential candidate against Trump.

Technical Outlook: SPX-500, DJ-30, and NQ-100

Technically, whatever may be the narrative, SPX-500 now has to sustain over 3115 for a further rally to 3135/3165*-3200*/3230 and 3255/3285-3305/3330 in the near term (under bullish case scenario).

On the flip side, sustaining below 3105, SPX-500 may fall to 3075/3050-3020*/2995 and 2975/2950*-2930/2915* in the near term (under bear case scenario).

Technically, whatever may be the narrative, DJ-30 now has to sustain over 27800 for a further rally to 28005*/28155-28350*/28615 and 28800/28955*-29100/29300 in the near term (under bullish case scenario).

On the flip side, sustaining below 27775-27750, DJ-30 may fall to 27500/27300*-27200/27000* and 26800/26550*-26300*/26000 in the near term (under bear case scenario).

Technically, whatever may be the narrative, NQ-100 now has to sustain above 8325 for a further rally to 8400*/8455-8510*/8575 and further to 8645/8705-8795/8880 in the near term (under bullish case scenario).

On the flip side, sustaining below 8300, NQ-100 may fall to 8215/8160*-8125/8060 and 8000/7950-7885/7800 in the near term (under bear case scenario).

 

 

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