After a December of sustained losses on the US stock market, the 26th saw a major rebound on reports from Mastercard regarding an increase in US retail sales (excluding motor vehicles) between the 1st of November and Gregorian Christmas Eve. According to Mastercard, retail sales were up at a rate of 5.1% compared with the same period in 2017. Following the closing bell on the 26th, the Dow Jones Industrial Average had witnessed its single largest daily point gain in history. The Dow’s overall point gain was 1,086 – a 4.98% increase over trading on the 24th. The S & P 500 rose by 4.96%, closing the day on 2,467.70 points while the Nasdaq saw a gain of 5.84%, with a total of 6,554.36 points at day’s end.
With retail leading the rally, oil was also up with Brent Crude rising 7.9% to close the day at $54.47 a barrel, while U.S. West Texas Intermediate crude futures closed the day with a rise of 8.7%, thus putting US crude at $46.22 a barrel.
Yesterday’s numbers in respect of retail and oil are symptomatic of markets that have had a manic-depressive year. Of the multiple factors influencing these volatile trends ranging from a cautious Fed to the US government shutdown -the trade war with China is the most easily managed as its causes were entirely political and artificial and what’s more, were largely the brainchild of a single powerful individual – US President Trump. Therefore the instability caused by the trade war could be brought to an end with the stroke of Trump’s pen.
While the geopolitical deadlock over the politically motivated kidnapping and arrest of Huawei CFO Meng Wanzhou by Canadian authorities (acting on orders from Washington) indicated a negative development in a trade war that is being increasingly weaponised by the United States, the effects of Meng’s horrible situation have not apparently stalled progress in negotiations. Owing to China’s ability to follow the dictum of Sun Tzu and accordingly to “act weak when you are strong and act strong when you are weak”, Beijing has largely compartmentalised a desire to end the trade war in rapidly fashion whilst maintaining a firm determination not to let the violation of Meng’s human rights go unanswered.
It is against this background that one must view reports broken by Bloomberg that sometime during the week of 7 January, a US trade delegation will fly to Beijing to resume talks on ending the trade war. According to the report:
“Deputy U.S. Trade Representative Jeffrey Gerrish will lead the Trump administration’s team, which will also include Treasury Under Secretary for International Affairs David Malpass, according to the people, who spoke on the condition of anonymity. Neither the USTR nor Treasury responded to requests for comment.
Chinese Ministry of Commerce spokesman Gao Feng confirmed that the two sides planned to sit down for talks next month, although he didn’t provide a date for the meeting during his regular briefing in Beijing on Thursday”.
Such a meeting would be the first face-to-face trade talks between Chinese and US officials since Presidents Xi Jinping and Donald Trump meet at the G20 summit in Argentina on the 1st of December, although both sides are reportedly in regular electronic and telephone communication. With an end to the artificially conceived trade war offering the greatest chance of injecting stability into volatile US and global markets, there ought to be a clear incentive for rapid action in January, in spite of the fact that the White House has arbitrarily set the 1st of March, 2019 as the deadline for the current set of talks – a deadline which Chinese officials have largely dismissed as patronising and not conducive to respectful rules based discussions.
And yet throughout what should be a transparent negotiation process, the US continues to talk out of both sides of its mouth. While the US markets are clearly clamouring for the stability that an end to the trade war would likely bring, Washington continues to pressure its allies to restrain issuing contracts to Huawei for the building of technologically revolutionary 5G mobile networks. After applying pressure to both Canada and Australia, now the US is trying to convince Britain to detach itself from a planned Huawei 5G network under the defamatory and Sinophobic guise that such a commercial/civilian mobile system is a threat to national security.
Yet even in spite of the McCarthyite campaign against Huawei engineering by Washington, the Chinese company saw a 21% rise in profits in 2018. This yet again proves that as markets throughout Asia, Africa and Latin America expand, the US and its traditional allies are going to represent a deceased market share for companies looking to trade worldwide. Even as Huawei products are difficult to obtain in the US, the company still managed to overtake the US giant Apple to become the world’s largest seller pf smart phone technology in 2018.
Throughout all of this, China has thus far been able to astutely compartmentalise the US war on Huawei and its CFO on the one hand and trade negotiations on the other. Trump’s own personal volatility still leaves more questions than answers when it comes to just what will be accomplished during bilateral trade talks in early January, but clearly the global markets including Wall Street are yearning for stability in what has been a very unpredictable year.