U.S. stock futures jump after Trump-Xi trade armistice

NEW YORK (Reuters) – U.S. stock index futures jumped on Sunday, suggesting Wall Street was set rise further after its biggest weekly gain last week in nearly seven years as China and the United States agreed to shelve any new tariffs and reset discussions.

SP 500 e-mini futures ESc1 were up 1.6 percent on high contract volume after trading resumed for the week at 6 p.m. (2300 GMT). Dow Jones Industrial Average e-mini futures 1YMc1 rose 1.8 percent, while Nasdaq 100 e-mini futures NQc1 jumped nearly 2 percent.

After getting clobbered for much of the past two months, U.S. stocks rallied last week on optimism that a detente could be reached between U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, over trade between the world’s top two economies.

The outcome of the meeting between the two leaders in Buenos Aires on the sidelines of the G20 summit over the weekend appeared to set the stage for further gains. The two agreed to de-escalate tensions over trade that have dogged U.S. and global markets off and on throughout the year.

A U.S. pledge not to boost tariffs on $200 billion of Chinese goods could mark the most important deal in years between the two countries.

For the full week ended Friday, the SP 500 Index .SPX gained nearly 5 percent and the Nasdaq Composite Index .IXIC, loaded with tech companies that had been buffeted by costs associated with tariffs imposed by Trump on Chinese imports, gained more than 5.6 percent.

Reporting by Jonathan Spicer and Dan Burns; Editing by Sandra Maler and Peter Cooney

China-U.S. trade truce dependent on U.S. sincerity: China Daily

SHANGHAI (Reuters) – The trade war truce agreed by China and the United States at the weekend could help them resolve their differences amicably, but lasting improvements in relations will depend on U.S. “sincerity”, the official China Daily said on Monday.

China and the United States agreed to halt new tariffs during talks between Chinese President Xi Jinping and U.S. President Donald Trump in Argentina on Saturday following months of escalating tensions on trade and other issues. [nL2N1Y604A]

In a meeting lasting two and a half hours, the United States agreed not to raise tariffs further on Jan. 1, while China agreed to purchase agricultural products from U.S. farmers immediately.

The two sides also agreed to begin discussions on how to resolve issues of concern, including intellectual property protection, non-tariff trade barriers and cyber theft.

But in an editorial, China Daily warned that while the new “consensus” was a welcome development and gave both sides “breathing space” to resolve their differences, there was no “magic wand” that would allow the grievances to disappear immediately.

“Given the complexity of interactions between the two economies, the rest of the world will still be holding its collective breath,” it said.

In an separate editorial published on Sunday, China’s state news agency Xinhua said the new consensus “demonstrates that as long as the two sides have sincerity, there is a way out.”

It called on both sides to “take immediate steps” to address concerns and bring trade and economic relations back to normal but warned that there was still “a long way ahead before anything of substance can be achieved.”

Reporting by David Stanway; Editing by Sam Holmes

Trump-Xi trade armistice clears way for more market gains

NEW YORK (Reuters) – One of the darkest clouds hanging over Wall Street somewhat dissipated on Saturday when China and the United States agreed to shelve any new tariffs and reset discussions, at least temporarily halting an increase in their tensions over trade.

Investors said the agreement, lasting 90 days, between Chinese President Xi Jinping and U.S. President Donald Trump at the G20 summit spelled a reprieve for stocks and could pave the way for a positive bookend to a volatile trading year.

The trade tension between Washington and Beijing, along with an uncertain outlook for U.S. rate hikes, have for months dogged prospects for equities. The U.S. pledge not to boost tariffs on $200 billion of Chinese goods could mark the most important deal in years between the world’s top two economies.

“It sets a pretty positive tone (and) stocks should have a decent rally into December,” said Nathan Thooft, Boston-based global head of asset allocation for Manulife Asset Management.

Thooft said he believed the Trump administration was using a threat to raise tariffs to 25 percent on Jan. 1, from 10 percent now as a negotiating tactic. “So when you start to see evidence that there is the ability to come to some type of agreement, that has to be viewed as a positive,” he said.

The stock market logged an official correction after a selloff in October and continued volatility in November that, just over a week ago, had left the benchmark SP 500 .SPX stock index down 10 percent from its all-time high.

Markets rebounded last week on comments perceived as dovish from Federal Reserve Chair Jerome Powell, though the SP is up only 2.4 percent in 2018.

The latest trade standoff began in September when the United States imposed the 10 percent tariffs, prompting China to respond with its own. Ahead of the leaders’ dinner in Argentina, investors were bracing for a range of outcomes including a worse-case end to talks and more tit-for-tat measures that would continue to crimp economic and corporate profit growth.

Instead, the Americans and Chinese officially lauded the result.

Slideshow (2 Images)

Beijing agreed to buy what the White House called a “very substantial” amount of agriculture, energy, industrial and other products. While the clock ticks on the 90-day tariff reprieve, the two sides will try to work out thorny issues including technology transfer, intellectual property and cyber theft.

“It’s not solved by any stretch of the imagination,” said Thooft. But risk assets and cyclical U.S. sectors like materials and industrials should benefit, he said on Sunday.

Energy prices could also rebound on Monday since cooling trade tensions could boost the world economy and spur demand. Oil prices have dropped from a four-year high of about $76 per barrel in early October to just above $50 on Friday.

POWELL TESTIMONY

Aside from trade policy, Wall Street’s attention has also been trained on Fed policy.

Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee. But the hearing is expected to be postponed to Thursday because major exchanges will be closed Wednesday in honor of former U.S. President George H.W. Bush, who died on Saturday at the age of 94.

Last week, Powell said that while the Fed’s gradual tightening balances risks to the economy, the policy rate was “just below” a range of estimates of the so-called neutral level that neither stimulates nor cools growth. In response, stocks shot up and largely recovered November’s earlier losses.

In the wake of Powell’s speech, Nicholas Colas, co-founder of DataTrek Research, said “what happens in Buenos Aires will determine if stocks post a positive 2018.”

The specter of a global trade war has hovered over the market since March, when Trump announced tariffs on imported steel and aluminum. He also recently said the United States was studying auto tariffs, which could ripple through Europe and Japan, while a pact with Canada and Mexico left some investors heartened about potential progress with China.

Nancy Lazar, economist at research firm Cornerstone Macro, said in a notes that the 90-day tariff delay and China’s “incremental concessions” are good news.

“But given the stern U.S. stance, we’re certainly not raising our outlook,” she said of a 2.8-percent growth estimate for the fourth quarter, still comfortably above potential.

With U.S. corporate leaders increasingly voicing concerns over rising costs associated with tariffs, Wall Street on Monday should welcome any development that eases those pressures.

Reporting by Jonathan Spicer and Lewis Krauskopf; Editing Bernadette Baum and Grant McCool

G20 sealed landmark deal on WTO reform by ducking ‘taboo words’

BUENOS AIRES (Reuters) – Many delegates from the world’s 20 largest economies arrived at a summit in Argentina this week determined to clinch an agreement to reform the global trade system, pushed to a breaking point by tensions between the United States and China.

To do so, they had to bow to U.S. and Chinese demands to drop some of the pledges that have become hallmarks of the Group of 20 industrialized nations, which represents two-thirds of the global population.

But they left with a communique committing for the first time to reform the dysfunctional World Trade Organization (WTO), the body supposed to regulate global trade disputes.

“A number of words that we used to have always in G7 and G20 summit communiques became kind of taboos,” a European official said on Saturday in the midst of the negotiations. “We have American taboos and Chinese taboos.”

First among those taboos is “protectionism”. The U.S. administration has become sensitive to criticisms after President Donald Trump has imposed tariffs not only on $250 billion of Chinese goods but also on steel and aluminum imports that hit several of his G20 partners.

As a result, for the first time since G20 leaders held their inaugural meeting in Washington in 2008, their communique did not contained a pledge to fight protectionism.

China, meanwhile, steadfastly opposed the inclusion of the usual calls for “fair trade practices,” delegates said. Beijing rejects criticisms from the United States, Europe and Japan for dumping, industrial subsidies, abuse of intellectual property rights and technology transfers, amongst other practices.

Even the word “multilateralism” itself has fallen out of favor in a group designed to foster international cooperation.

Central to getting the United States to sign up to a phrase recognizing the importance of “multilateral trading system” was acknowledging that the system was falling short of its objectives, delegates said.

The United States is unhappy with what it says is the WTO’s failure to hold Beijing to account for not opening up its economy as envisioned when China joined the body in 2001.

To force reform at the WTO, Trump’s team has blocked new appointments to the world’s top trade court, which is rapidly running out of judges, meaning it will be unable to issue binding rulings in trade disputes. He has even threatened to withdraw the United States from the global body.

“There was an attempt from a lot of the other countries … to get the United States to commit to certain language with regard to the multilateral system,” said one senior U.S. official.

“We commit to multilateralism where it works … Is it achieving its intended objectives? In a lot of areas it’s falling short,” said the U.S. official, who asked not to be identified because of the confidential nature of the talks. 

The final statement said the group supports the “necessary reform of the WTO to improve its functioning”, allowing U.S. officials to claim a victory.

While there were no details of the proposed reform, many delegates hailed a breakthrough in committing Washington to global solutions.

“For the first time China and the United States agreed to engage on the WTO,” said one delegate closely involved in drafting the communique. “Given Trump’s earlier threats, to end up with the G20 saying it would work together on WTO reform is interesting.”

CHINA WAS KEY

European Union officials said that a key step in clinching a deal was getting China and major emerging economies to commit to language on trade early this week.

“The idea was to bring the Chinese into the discussion almost immediately,” said a second European official. “After APEC, we knew it would be important for the Chinese to feel there was no ganging up on them.”

At the Asia-Pacific Economic Cooperation (APEC) summit in mid-November, leaders failed to agree on a joint communique for the first time in the group’s 30-year history.

After APEC, Washington and Beijing traded accusations of blame but, with global markets increasingly roiled by trade tensions, both sides appeared more ready for compromise in Buenos Aires.

After the G20 talks ended, Trump and his Chinese counterpart Xi Jinping agreed over dinner on Saturday to a ceasefire in their trade conflict, calling off higher U.S. tariffs that were to go into effect on Jan. 1.

“The spirit wasn’t adversarial,” said the delegate closely involved in the G20 drafting, adding that perhaps because of the fallout after APEC, officials at least tried to work things out.

Delegates worked until 6:30 a.m. on Saturday, the final day of the summit, watering down language on migration and refugees in the face of resistance from the United States and others, European and Argentine officials said.

And they still had not tackled one of the thorniest issues: climate change.

“That was what they discussed (Saturday) morning till noon,” an Argentine government spokeswoman said, just hours before the communique was made public.

In the end, members agreed to disagree. The United States reaffirmed its commitment to withdraw from the Paris Climate Accord – as it had at the previous G20 summit in Germany last year – while other members said they would fully implement it.

Veteran negotiators were phlegmatic about the difficulties in agreeing on a text.

“There is always at least one overnighter in sessions like these,” said the delegate closely involved in the drafting, adding “sometimes it was tough to find the right word to stick to the middle ground.”

Reporting by Caroline Stauffer, Nicolas Misculin, Scott Squires, Roberta Rampton and Daniel Flynn; Editing by Daniel Flynn and Sandra Maler

Asian shares rally on Sino-U.S. trade truce, oil bounces

SYDNEY (Reuters) – Asian shares rallied on Monday after U.S. and Chinese leaders brokered a truce in their trade conflict, a relief for the global economic outlook and a tonic for emerging markets.

Trade-exposed currencies led the early gains, with the Australian dollar notching a four-month peak, while the dollar slipped against the yuan CNH=.

E-Mini futures for the SP 500 ESc1 climbed as much as 1.9 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.6 percent. Nikkei .N225 gained 0.9 percent to a six-week high.

“Markets are opening with a knee-jerk boost to risk appetite but time will tell how enduring the optimism proves to be,” said ANZ economist Jo Masters. “There are already very different official takes on what was achieved at the meeting.”

“But for now, both sides can claim a win,” she added. “Perhaps not insignificantly, it provides a window to export the soybean crop from key Republican states, at least.”

China and the United States agreed to halt additional tariffs in a deal that keeps their trade war from escalating as the two sides try again to bridge their differences with fresh talks aimed at reaching a deal within 90 days.

The White House said on Saturday that President Donald Trump told Chinese President Xi Jinping during high-stakes talks in Argentina that he would not boost tariffs on $200 billion of Chinese goods to 25 percent on Jan. 1 as previously announced.

“Deeply contentious thornier structural issues such as forced technology transfer remain unresolved,” cautioned Westpac FX analyst Robert Rennie.

“This US-China agreement is thus better characterised as a “mini-breakthrough” that puts a momentary pause on trade tensions rather than a comprehensive policy deal.”

Investors chose to see the glass as half full and lifted the Aussie dollar 0.7 percent to $0.7357 AUD=D3. It firmed 0.8 percent on the safe-haven yen to 83.70 AUDJPY=.

The U.S. dollar eased on a basket of currencies to 97.136 =USD, but also firmed on the yen to 113.79 JPY=. The euro added 0.1 percent to $1.1330 EUR=.

The Mexican peso jumped more than 1 percent to 20.185 MXN=D3, helped also by reports that newly sworn-in Mexican President Andres Manuel Lopez Obrador may change his earlier plan to cancel an airport construction.

The dollar had come under pressure last week when comments by Federal Reserve Chair Jerome Powell were interpreted by markets as hinting at a slower pace of rate hikes.

Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee. But the hearing is expected to be postponed to Thursday because major exchanges will be closed on Wednesday in honour of former U.S. President George H.W. Bush, who died on Saturday at the age of 94.

Treasuries rallied hard late on Friday to leave 10-year yields down at 2.99 percent before bouncing back to 3.035 percent US10YT=RR early on Monday.

The progress on Sino-U.S. trade and an easier dollar could provide some support to commodity prices.

Oil suffered its weakest month in more than 10 years in November, losing more than 20 percent as global supply outstripped demand. [O/R]

Speculation is high the Organization of the Petroleum Exporting Countries (OPEC) and Russia would agree some form of production cut at a meeting in Vienna on Thursday.

Brent futures LCOc1 rose $1.62 to trade at $61.09 a barrel, while U.S. crude CLc1 gained $1.52 to $52.45.

Additional reporting by Hideyuki Sano in TOKYO; Editing by Peter Cooney Shri Navaratnam

BRICS slam protectionism as China-U.S. spat overshadows G20 talks

BUENOS AIRES (Reuters) – Chinese President Xi Jinping and the leaders of major developing economies condemned protectionism at a G20 summit in Argentina on Friday overshadowed by U.S. President Donald Trump’s threat to escalate tariffs on China.

This year’s two-day gathering is a major test for the Group of 20 industrialized nations, whose leaders first met in 2008 to help rescue the global economy from the worst financial crisis in seven decades.

With a rise in nationalist sentiment in many countries, the G20 – which accounts for two-thirds of the world population – faces questions over its ability to deal with trade tensions, which have roiled global markets.

Hanging over the summit in Buenos Aires is the trade dispute between the United States and China, the world’s two largest economies, which have imposed tariffs on hundreds of billions of dollars worth of each other’s imports after Trump launched an effort to correct what he views as China’s unfair commercial practices.

Global financial markets will take their lead next week from the outcome of talks between Trump and Xi over dinner on Saturday, aimed at resolving differences that are weighing on global economic growth.

Xi and other leaders from the BRICS group of leading emerging economies – Brazil, Russia, India, China and South Africa – issued a statement calling for open international trade and a strengthening of the World Trade Organization (WTO).

“The spirit and rules of the WTO run counter to unilateral and protectionist measures,” they said. “We call on all members to oppose such WTO-inconsistent measures, stand by their commitments undertaken in the WTO.”

Beijing hopes to persuade Trump to abandon plans to increase tariffs on $200 billion of Chinese goods to 25 percent in January, from 10 percent at present.

U.S. stocks closed higher on Friday on hopes that a deal could be reached.

Trump said there had been some positive signs.

“We’re working very hard. If we could make a deal that would be good. I think they want to. I think we’d like to. We’ll see,” he said.

  • Trump: ‘something could very well come out’ of trade talks with China’s Xi
  • Buenos Aires locked down for G20 summit, protest tightly controlled
  • Factbox: Tariff wars – duties imposed by Trump and U.S. trading partners

A Chinese foreign ministry official in Buenos Aires said there were signs of increasing consensus ahead of the discussions, although differences remained.

SEEKING COMMON GROUND

On the eve of the summit, G20 nations were still trying to reach consensus on wording for the summit’s communique on major issues including trade, migration and climate change, which in past years have been worked out well in advance.

Officials hammering out the communique, known as “sherpas,” said they expected to work into the night.

“This has been an unprecedentedly long drafting,” said Russia’s sherpa, Svetlana Lukash. “It’s very complicated,” she said, adding that differences remained on all the key issues.

Earlier in November, officials from countries attending a major Asia-Pacific summit failed to issue a joint statement for the first time after the U.S. delegation clashed with China over trade and security.

However, delegates to the Buenos Aires talks said good progress had been made on economic sections of the final communique. Argentina’s presidency voiced cautious optimism that consensus would be reached, but a White House official said the United States would walk away from any statement that prejudiced U.S. interests.

Highlighting the deep rifts within the G20, European Council President Donald Tusk said the European Union would extend its economic sanctions on Moscow in December, after Russian ships fired on Ukrainian vessels in the Sea of Azov last week, seizing the boats and sailors.

“As this is a difficult moment for international cooperation, I would like to appeal to the leaders to use this summit … to seriously discuss real issues such as trade wars, the tragic situation in Syria and Yemen and the Russian aggression in Ukraine,” Tusk told a news conference.

Trump cited Russia’s seizure of the ships as the reason he canceled a planned bilateral meeting with Russian President Vladimir Putin, where they had been expected to discuss the U.S. leader’s threat to withdraw from the Cold War-era Intermediate-Range Nuclear Forces treaty.

Moscow said U.S. domestic politics may have been the real reason behind the cancellation after Trump’s former personal lawyer pleaded guilty on Thursday to lying to Congress about a proposed Trump Organization skyscraper in the Russian capital.

A White House spokeswoman denied this and Trump said on Friday the ships’ seizure was the “sole reason” he scratched the meeting.

A Kremlin spokesman said Putin was ready to continue talks with Trump.

LONELY SAUDI PRINCE

The presence of Crown Prince Mohammed bin Salman at the summit also raised an awkward dilemma for leaders, and Saudi Arabia’s de facto leader cut a lonely figure standing at the edge of the G20 family photo.

Prince Mohammed arrived under swirling controversy over the murder of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul on Oct. 2. Human Rights Watch asked Argentine prosecutors to investigate him for human rights abuses.

U.S. Secretary of State Mike Pompeo and Saudi Foreign Minister Adel al-Jubeir discussed the importance of making progress in the investigation into Khashoggi’s killing during talks in Buenos Aires on Friday, the U.S. State Department said.

British Prime Minister Theresa May told the prince that the killers of Khashoggi should be held to account, her office said after the two leaders met. Saudi Arabia said the prince had no prior knowledge of the murder.

French President Emmanuel Macron told the prince in a separate meeting that Europeans will insist on international experts being part of the investigation into Khashoggi’s killing.

Oil markets were awaiting a bilateral meeting between Putin and Prince Mohammed on Saturday afternoon for any sign that Russia will participate in a production cut by the OPEC oil cartel next month.

Putin was the only leader to exchange a warm greeting with the prince, high-fiving him when he entered the main summit room.

TRUMP AND TRADE

One bright spot before the summit opened was the signing of a revised U.S.-Mexico-Canada trade pact to replace the North American Free Trade Agreement.

Slideshow (21 Images)

Signing the agreement alongside Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto, Trump said he looked forward to working with the U.S. Congress to complete the terms of the deal and did not anticipate problems.

The three countries agreed a deal in principle to govern their trillion dollars of mutual trade after a year and a half of contentious talks concluded just an hour before a deadline on Sept. 30.

Trudeau still had a few barbs on Friday. He called the deal by its old name NAFTA, prodded Trump over U.S. steel and aluminum tariffs and said General Motors Co’s decision to cut production and its North American workforce, including in Canada, was a “heavy blow.”

Reporting by Roberta Rampton, Michael Martina, Matt Spetalnick, Maximilian Heath, Scott Squires, Cassandra Garrison and Kylie Maclellan in Buenos Aires; Writing by Daniel Flynn; Editing by Ross Colvin, Frances Kerry and Rosalba O’Brien

Trump-Xi meeting puts stock market on edge

NEW YORK (Reuters) – Trade tensions that have clouded Wall Street’s outlook for more than eight months will come to a head this weekend at a global political summit, with investors bracing for a range of outcomes that stand to influence stocks for the rest of the year.

At the G20 summit on Saturday, U.S. President Donald Trump and his Chinese counterpart Xi Jinping are expected to talk, in what some see as the most important meeting in years between the leaders of the world’s two largest economies.

Trump has imposed tariffs on $250 billion worth of Chinese imports and threatened even more, and investors are concerned that an escalation of tit-for-tat measures will crimp economic and corporate profit growth.

While hopes are dim for an outright deal, many investors are optimistic the two sides will show some progress toward potentially ending the tariff war. By contrast, investors said, any escalation in tensions could send the market, which recently confirmed a correction, back toward its recent lows.

“It feels like people are hopeful that this meeting yields if not a concrete plan on how to move forward in trade, at least some positive commentary from both sides that we are going to work towards a resolution,” said Mona Mahajan, U.S. investment strategist with Allianz Global Investors.

“We are optimistic that we hopefully won’t get a worst-case scenario, which is President Trump comes away and says absolutely no on any prospect of working with China going forward,” she said.

Investor consensus over the past two weeks has been forming that “there is some type of short-term deal coming out of this that opens the window for a bigger deal,” said Walter Todd, chief investment officer at Greenwood Capital, although he cautioned there was “still a lot of uncertainty.”

U.S. options activity already shows that traders are bracing for more volatility tied to the meeting of the heads of the world’s 20 largest economies, which gets underway on Friday in Buenos Aires, Argentina.

The benchmark SP 500 .SPX stock index has bounced back this week after having dropped more than 10 percent from its all-time high by the end of last week, perhaps leaving more room for declines should the meeting disappoint investors. The index is now up just 2.4 percent in 2018.

“I don’t think that our market would have a real significant upward move based off of G20, but if something goes off kilter a little bit, you could definitely see significant downside pressure,” said Jonathan Corpina, senior managing partner for Meridian Equity Partners, who works on the New York Stock Exchange trading floor.

Slideshow (2 Images)

Wall Street’s attention has been trained on interest rate policy along with the U.S.-China talks. But the focus may have shifted more to trade, following comments on Wednesday by Federal Reserve Chair Jerome Powell that lifted stocks and that many investors read as signaling that the Fed’s rate-hiking cycle may be nearing an end.

In the wake of Powell’s speech, Nicholas Colas, co-founder of DataTrek Research, said “what happens in Buenos Aires will determine if stocks post a positive 2018.”

The specter of a global trade war has hovered over the market since Trump announced tariffs on imported steel and aluminum in March. Trump also recently said the U.S. was studying auto tariffs, which could ripple through Europe and Japan, while a pact with Canada and Mexico left some investors heartened about potential progress with China.

“I think it’s the number one issue for investors,” Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey, said of trade.

“It’s ever since we started with the tariffs that the market has begun to wobble,” Meckler said. “And if our future is an all-out trade war with China, I don’t think the stock market could sustain these levels of prices.”

Should trade tensions escalate, Mahajan said it could shave expected earnings growth for SP 500 companies in 2019 to 7 percent from about 9 percent.

To be sure, some investors were wary of putting too much weight on the meeting.

“The market would be at greater risk if something happens and the market rallies, and you have this perception that ‘ok everything has been solved,’” said Willie Delwiche, investment strategist at Baird in Milwaukee.

Still, with U.S. corporate leaders increasingly voicing concerns over rising costs associated with tariffs, any development that eases those pressures would be welcome on Wall Street.

“Trade policy is having a negative effect on growth here in the U.S. and elsewhere,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. “This particular meeting between President Trump and President Xi is a pivotal moment where something needs to get done.”

Ameriprise Chief Market Strategist David Joy was doubtful of “any real resolution” but said “a so-called ceasefire that would allow discussions to continue without further escalation would be welcome.”

“Conversely, a lack of progress that leaves in place the possibility of more and higher tariffs would likely be market negative,” Joy said in written commentary this week.

UBS equity strategist Keith Parker said in a research note this week that “the absence of a negative G20 outcome,” that is if the sides agree to just keep talking, could see the SP 500 trade up 4 percent into year end. By contrast, Parker said, the index could fall 7 percent if the trade dispute escalates, “with Trump-Xi talks going poorly a step to that downside case.”

Additional reporting by April Joyner in New York; Editing by Dan Burns and Bernadette Baum

G20 to negotiate communique ‘until last minute’, yet to discuss climate change: Argentina

BUENOS AIRES (Reuters) – G20 leaders were due to discuss climate change at the morning session of their summit on Saturday and negotiations on a draft communique were expected to last until the final minute, a spokesperson for the Argentine G20 sherpa said.

Leaders were close to agreement on wording over reform of the World Trade Organization and had “advanced a lot” on trade, the spokesperson said: “We are going to negotiate till the last minute”.

Reporting by Nicolas Misculin; writing by Cassandra Garrison; Editing by Daniel Flynn

Europeans say G20 members agree to reform WTO in draft communique

BUENOS AIRES (Reuters) – European officials said that G20 nations had agreed to commit to reforming the World Trade Organization in a preliminary draft of the communique due to be released at the end of a two-day meeting of the bloc on Saturday.

The officials also said that language regarding migration and refugees in the draft communique would be kept to a minimum while the wording on climate change would not show any backtracking. The communique still needs final endorsement from member nations.

Reporting by Caroline Stauffer and Scott Squires; Editing by Daniel Flynn

Trump, China’s Xi poised for high-stakes summit over trade war

BUENOS AIRES (Reuters) – U.S. President Donald Trump and Chinese President Xi Jinping will wrap up a global summit on Saturday with high-stakes talks expected to determine whether they can begin defusing a damaging trade war between the world’s two biggest economies.

With the United States and China locked in growing disputes over commerce and security that have raised questions about the future of their relationship, Trump and Xi are due to sit down for dinner at the end of a two-day gathering of world leaders in Buenos Aires.

The first day of the G20 summit offered glimmers of hope for progress between Washington and Beijing despite Trump’s earlier threat of new tariffs, which would increase tensions already weighing on global financial markets.

But on the eve of what is seen as the most important meeting of U.S. and Chinese leaders in years, both sides said differences remained, and the outcome of the talks were uncertain.

This year’s summit has proved to be a major test for the Group of 20 industrialized nations, whose leaders first met in 2008 to help rescue the global economy from the worst financial crisis in seven decades.

With a rise in nationalist sentiment in many countries, the G20, which accounts for two-thirds of the global population and 85 percent of the global economy, faces doubts over its ability to deal with trade tensions and other geopolitical differences among its members.

Delegates from G20 nations worked late into the night to seek agreement on the summit’s final communique, which in past years has been worked out well in advance.

European officials said on Saturday that a draft of the document committed to reforming the World Trade Organization (WTO), which has been engulfed in institutional crisis just when it is most needed to perform its role as umpire in trade disputes. They said the draft also included a reference to climate change – a sensitive issue for Trump, who is a skeptic that global warming is caused by human activity.

The communique needs to be endorsed by the leaders of member states.

Looming large at the summit is the trade fight between the United States and China, which have imposed tariffs on hundreds of billions of dollars on each other’s imports after Trump began an effort to correct what he views as China’s unfair commercial practices.

With the trade war weighing on the global economy, world financial markets are hanging on every development and will be watching closely to see if any compromise can be struck between Trump and Xi. The meeting will also be a test of the personal chemistry between the two leaders, which Trump has hailed as a warm friendship.

Another big unknown, however, may be Trump’s personal unpredictability and his penchant for injecting drama into his appearances on the world stage.

TRUMP: A DEAL ‘WOULD BE GOOD’

Trump was typically coy on Friday even as he noted some positive signs.

“We’re working very hard. If we could make a deal that would be good. I think they want to. I think we’d like to. We’ll see,” he said, speaking during a meeting with Japanese Prime Minister Shinzo Abe.

A Chinese foreign ministry official in Buenos Aires said there were signs of increasing consensus ahead of the discussions but that differences persisted.

Beijing hopes to persuade Trump to abandon plans to hike tariffs on $200 billion of Chinese goods to 25 percent in January, from 10 percent at present. Trump has threatened to go ahead with that and possibly add tariffs on $267 billion of imports if there is no progress in the talks.

Trump has long railed against China’s trade surplus with the United States and Washington accuses Beijing of not playing fairly on trade. China calls the United States protectionist and has resisted what it views as attempts to intimidate it.

The two countries are also at odds militarily over China’s extensive claims in the South China Sea and U.S. warship movements through the highly sensitive Taiwan Strait.

Xi and leaders from the BRICS group of leading emerging economies – Brazil, Russia, India, China and South Africa – called in a statement on Friday for open international trade and a strengthening of the WTO.

Trump cited Russia’s seizure of Ukrainian ships last week as the reason he canceled a planned bilateral meeting with Russian President Vladimir Putin.

The presence of Crown Prince Mohammed bin Salman at the summit also raised an awkward dilemma for leaders, and Saudi Arabia’s de facto leader cut a lonely figure standing at the edge of the G20 family photo on Friday.

Prince Mohammed arrived under swirling controversy over the murder of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul on Oct. 2. Saudi Arabia has said the prince had no prior knowledge of the murder.

Human Rights Watch asked Argentine prosecutors to investigate him for human rights abuses.

Reporting by Roberta Rampton, Michael Martina, Matt Spetalnick, Maximilian Heath, Scott Squires, Cassandra Garrison, Daniel Flynn and Kylie Maclellan in Buenos Aires; Writing by Matt Spetalnick, editing by Ross Colvin and Louise Heavens