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European Shares Off Lows, US Markets Turn Positive After Trump Says China Wants to Negotiate

James Hyerczyk

European shares are recovering from early session lows and U.S. stock indexes have turned higher in the premarket session after a comment from President Trump helped ease tensions surrounding U.S.-China trade relations.

The moves are likely being fueled by intraday short-covering as investors await more details about Trump’s remark. At the start of the European and the U.S. futures sessions, the markets were being pressured by an escalation of the trade war between the two economic powerhouses.

In Europe, the U.K.’s FTSE 100 Index is at 7094.98, down 33.20 or -0.47%. The U.K. markets are closed due to a bank holiday. Germany’s DAX is at 11579.98, down 31.53 or -0.27% and France’s CAC is trading 5320.71, down 6.16 or -0.12%.

In the U.S., the benchmark September E-mini S&P 500 Index is at 2868.50, up 13.00 or +0.45%. The blue chip September E-mini Dow Jones Industrial Average is at 25799, up 129 or +0.51% and the technology-driven September E-mini NASDAQ-100 Index is at 7561.75, 57.25 or +0.74%. All three indexes are well-above their intraday lows.

In Europe, investors were still catching up to the weakness on Wall Street on Friday. The bearish sentiment was driven by China’s plans to impose additional tariffs on $75 billion in U.S. goods, which was followed by Trump’s ordering American firms to find an “alternative” to operating in China, and the imposition of even tougher tariffs on the world’s second largest economy.

Stocks Recover on Positive Trump Comment

European shares bounced off their lows and recovered some of their early losses, and the major U.S. stock indexes turned higher for the session after President Trump said on Monday that China is ready to come back to the negotiating table and the two countries will start talking very seriously.

Speaking at the G-7 summit in Biarritz in France, Trump praised Chinese President Xi Jinping and welcomed his desire for a deal and for calm.

“China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table and I think they want to do something. They have been hurt very badly but they understand this is the right thing to do and I have great respect for it. This is a very positive development for the world,” Trump said.

Good News, but Traders Want to Hear from China

The initial reaction by investors to Trump’s comments were positive, but this early move is likely to dissipate throughout the sessions if China doesn’t confirm Trump’s comments. Trump has made comments like this before so I think investors will want to hear from China before continuing the intraday move.

Traders shouldn’t read too much into the comment either since the tariffs imposed by both sides on Friday remain intact. It is going to take a retraction of the new tariffs by both sides to really encourage the shorts to cover and for new buyers to re-emerge.

This article was originally posted on FX Empire

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