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Stock markets are reacting less to US 'trade-tariff tantrum': strategist

Joanna Campione
·Producer

Investors are getting mixed signals on progress in the U.S-China trade war.

A day after President Donald Trump said he would delay additional tariffs on China to October 15 from October 1 as a “gesture of goodwill,” White House officials denied a report that they are considering an interim trade deal with China.

But the U.S. stock market continued to climb throughout Thursday’s trading session.

“As we go on in this trade tariff tantrum, the market's reaction is increasingly less and less,” Paul Schatz, Heritage Capital president, tells Yahoo Finance’s On the Move. “A couple months ago, news like this would've broken, and stocks would have gone down 1% to 2%.”

Instead, stocks hovered closer to record highs as investors mulled on other news: a sweeping stimulus package from the European Central Bank and U.S. core consumer prices hitting its highest level in a year. The Dow, S&P 500 and Nasdaq all closed the day up.

Schatz says investors don't seem to be reacting to every twist and turn in the trade saga as they did a month to three months ago.

“Investors should worry less about the tweets and more about other things in the markets. You know, earnings and the economy, and certainly sentiment,” he says. “But I don't think it's the clear-and-present danger it was several months ago.”

NEW YORK, NY - AUGUST 23: Traders work on the floor of the New York Stock Exchange (NYSE) on August 23, 2019 in New York City. The three major U.S. stock indexes ended lower, being their fourth consecutive week with some declines. (Photo by Eduardo Munoz Alvarez/Getty Images)
(Photo by Eduardo Munoz Alvarez/Getty Images)

A new round of talks is scheduled to take place in Washington in early October. Ahead of those talks comes reports that the Chinese may cut out some of the non-trade issues that have complicated progress, including U.S. involvement in the Hong Kong protests. That comes along with reports that China made its biggest purchase of U.S. soybeans since June, which could point to a willingness to come to a deal.

“I'm not sure the Chinese are actually in a position of strength, per se,” says Schatz. “But they're not in the position of weakness that the administration is selling.”

That's because, he says, there is no incentive for them to make a deal in the next 14 months leading up to the 2020 presidential election. “They know what they have in Trump. If they try to wait him out and he loses, perhaps they will get a better deal with somebody else,” Schatz say. “But frankly, 14 months to the Chinese is nothing.”

Joanna Campione is a producer for Yahoo Finance.

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