Markets are pricing in a US-China trade détente
US stock futures flipped from negative to positive on Thursday evening thanks not to any reevaluation of megacap tech earnings from conference calls, but rather because China’s Ministry of Finance put out a statement about potential trade talks with the US.
To quote:
“China has noted that senior US officials have repeatedly expressed their willingness to negotiate with China on tariffs. At the same time, the US has recently sent messages to China through relevant parties, hoping to start talks with China. China is currently evaluating this.
China’s position is consistent. If we fight, we will fight to the end; if we talk, the door is open.”
To be sure, this is not glowingly positive language. But both China and the US are talking about talking, and talking about talking generally leads to talking.
Traders are clearly taking this message to heart. One big source of outperformance today comes from ADRs of Chinese companies that trade in the US (like Alibaba). Chinese companies with lots of US sales exposure rose 1.3% overnight.
On the other hand, US companies with lots of sales exposure to China (excluding semiconductor companies) are basically up in line with the market.
