United States President Donald Trump and his Chinese counterpart Xi Jinping during a welcoming ceremony in front of the Great Hall of the People in Beijing, China, on November 9, 2017.
Qilai Shen | Bloomberg | Getty Images
Investors have been waiting for details of the "Phase 1" trade agreement that is expected to be signed between the United States and China on Wednesday, but they may already know what is included and there may be little new.
The stocks have been optimistic for weeks. Tuesday was no different, and the Dow, Nasdaq and S & P 500 peaked before a news agency's trade-related headline messed up the markets and sent the indices into negative territory.
Analysts said there could be some volatility in the release of the trade deal details. An agreement that is limited to details and has no teeth to stop trade abuses could possibly be seen as negative. Stocks faltered when the Bloomberg News Service reported Tuesday afternoon that tariffs would not be lifted until the second phase.
According to the report, the second phase was not expected to be completed until after the November elections. However, strategists did not find this a surprise, and a market that was looking for a positive surprise suffered a temporary setback.
The agreement is expected to stop further tariffs and cut tariffs from 15% to 7.5% for some Chinese goods.
"There's always & # 39; buying the rumor, selling the news. & # 39; One reason for the tremendous, incredible rally last year and especially towards the end of the year and for the good start this year was that we had one "China trade," said Ed Keon, QMA's chief investment strategist, said that "stocks are not cheap and any news could have an impact on the market."
Tom Block, political analyst at Fundstrat in Washington, said it was unusual that there were so few details about a deal to be signed. "Everything I've read and everyone I've spoken to has said that this was basically a standstill agreement with some minor issues, and we now know that one of those minor issues was that the United States classified China as a currency manipulator ", he said. "I don't think it's a coincidence."
Block said the deal could still be closed, and if there is a dispute it could be about how to phrase China's commitment to buying US agricultural products. He expects an agreement on the Chinese purchase of agricultural and energy products. There could also be a language that protects US intellectual property.
"This is a real ceasefire. This is the ceasefire substance that we saw," he said.
Peter Boockvar, Bleakley Advisory Group's chief investment officer, said the headline was really nothing new. The stock indices fluctuated and the Dow returned to positive territory.
"It is not surprising. There was no plan to remove the tariffs. We saw that when a deal was announced, some tariffs were slightly reduced from 15% to 7.5%, even though they left tariffs on all existing goods "said Boockvar said. "The guess was that tariffs would only drop in the second phase and Trump said there would be no second phase until after the election recently. It was always my belief that they would only drop when we got one . " two agreements. We are still stuck with these tariffs that are slowing growth in trade and manufacturing. "
"These tariffs have now become a roach motel," said Boockvar.
Keon said the market isn't really looking for the trade deal much more. "It looks like we agree to cut some tariffs. We have already removed them from the list of currency manipulators. They will agree to buy some agricultural products. There is probably a language that says that they are intellectual Property will work together. " It is my guess that there will be a vague language. "
Block said Trump would leave the door open for more tariffs in Europe, but he's unlikely to launch new ones right now.
"He wants NATO to do more in the Middle East, and that's difficult if you escalate the trade war," said Block.