Investors hope US-China talks to cool trade war, dispel uncertainty over financial mkts

Geneva: Investors are hopeful that US-China trade talks will cool a trade war between the world’s two largest economies and dispel some of the uncertainty clouding financial markets, though few expect a major breakthrough just yet, Reuters reported.

The highly anticipated meeting in Switzerland could mark one of the biggest developments since US President Donald Trump launched sweeping tariffs on April 2, which threw the global trade landscape into chaos and set off extreme market volatility.

“This is the mother of all negotiations,” said Alejo Czerwonko, chief investment officer, Emerging Markets Americas, at UBS.

“There are hundreds of billions of dollars of trade on the line, a 145 per cent tariff on Chinese exports that amounts to some sort of de facto embargo and grievances that extend well beyond trade.”

The US-China trade talks in Geneva had adjourned for the day and were set to continue on Sunday, a source familiar with the discussions told Reuters.

US President Donald Trump said late on Saturday that the two countries had negotiated “a total reset ... in a friendly, but constructive, manner.” He added that “great progress” was made, without elaborating.

Recently, investors have expressed optimism that the worst-case trade scenarios would not come to pass, and pointed to signs of de-escalation between the US and China as a reason behind a rebound in equities.

But despite comments by Trump ahead of the talks suggesting a lower level of Chinese tariffs, and a trade deal announced on Thursday between the US and Britain, many market participants said they were not expecting major breakthroughs this weekend.

Rather, they confined themselves to hoping that nothing goes wrong when the two sides come face-to-face for the first formal round of what may be protracted negotiations. “We’re still doubtful that direct US-China negotiations will lead to a ‘grand compromise’,” said Thierry Wizman, global FX and rates strategist at Macquarie, in a note to clients.