The buoyant U.S. stock markets early in the week belied the volatility in Asia caused by what Peter Navarro said in an interview where he had to subsequently clarify a particular comment was taken "wildly out of context." The White House trade adviser and longtime China hawk replied "It's over" to Martha MacCallum, the host of Fox News' "The Story," when asked about the trade deal with China late on Monday.
Hong Kong's benchmark indicator, Hang Seng Index (HSI) declined as much as 1.3 percent following the news. While Navarro issued a statement to say the comments "had nothing at all to do with the Phase I trade deal, which continues in place," it took President Donald Trump's tweet that the "China Trade Deal is fully intact" to truly calm nerves.
HSI promptly erased all the losses while Dow (INDU) futures which were previously down about 400 points also clawed back losses. The swift reaction showed that market players were still concerned about the trade deal and were cognizant of the negative impact if it was terminated.
We also learned from this episode that President Trump was concerned enough to make a quick tweet to dispel any notion the trade deal was off. It goes to show, despite his tough talks and proclamation that the U.S. could "save $500 billion" if it stops importing from China, President Trump seems keen to keep the Phase One agreement. This makes sense for someone who has "inextricably tied" his re-election chances to the stock market.
An elaboration by U.S. Treasury Secretary Steven Mnuchin and White House economic adviser Lawrence Kudlow on the focus of the next coronavirus relief bill boosted market confidence on Tuesday. However, Chinese stock markets did not enjoy the tailwind the next day as they were closed for the Dragon
