Stocks fall au­gurs trade war un­cer­tainty

Global Times - - Editorial -

US stocks tum­bled on Wed­nes­day, with the Dow Jones In­dus­trial Av­er­age fall­ing 3.15 per­cent and the Nas­daq Com­pos­ite plung­ing 4.08 per­cent. The Wall Street nose­dive af­fected global stock mar­kets. The Shang­hai Com­pos­ite in­dex dropped 5.22 per­cent and fell be­low the key psy­cho­log­i­cal level of 2,638 points.

China’s A-share mar­ket has been fall­ing since 2018, and it’s hard to tell if it has hit the bot­tom. The mar­ket mood is pes­simistic and lack­ing in con­fi­dence, but in­vestors are still open­ing po­si­tions. Both hope and pes­simism linger.

US stocks are an­other story. The Dow Jones once reached the apex of 26,000, caus­ing wor­ries of a bub­ble. US stocks’ price-earn­ings ra­tio is too high and US bonds’ rate of re­turn is as high as 3.2 per­cent, adding pres­sure to the stock mar­ket. Ev­ery tum­ble will make in­vestors vig­i­lant for a dan­ger­ous turn­ing point.

The stock mar­ket fall has a sub­tle re­la­tion­ship with the trade war. Tech­nol­ogy shares, as the front line of the trade war, led de­clines.

Ap­ple fell 4.5 per­cent, Ama­zon 6.15 per­cent and Mi­crosoft 5.43 per­cent. Bloomberg’s slan­der­ous re­port on China al­ready af­fected the stock price of Ap­ple and Ama­zon.

The White House once re­garded the US bull mar­ket as im­por­tant cap­i­tal in the trade war. Wash­ing­ton also used the good eco­nomic data in the past two quar­ters to boost morale.

The US stock plunge on Wed­nes­day shows the US leader that it’s un­re­li­able to use tem­po­rary pros­per­ity as ar­mor in a trade war.

The US econ­omy is still on an up­beat trend and China is at a rel­a­tively low point of self-ad­just­ment.

With the trade war at a stale­mate, the US will sooner or later ap­proach a turn­ing point.

As the point closes, Wash­ing­ton will feel uneasy no mat­ter how calm it makes it­self out to be. The US must hope that China sur­ren­ders as soon as pos­si­ble. Once the US passes the turn­ing point, it will face much more pain in the trade war.

A trade war is not a stock mar­ket war, or else the US would be well qual­i­fied to jeer at China. On this oc­ca­sion, China’s A-shares dropped more than the US stock mar­ket, but the fu­ture is hard to tell.

The stock mar­ket has a lim­ited im­pact on the whole Chi­nese econ­omy and the Chi­nese econ­omy has with­stood this round of im­pacts. What will hap­pen to the US stock mar­ket and how it af­fects the US econ­omy re­main to be seen.

Wash­ing­ton shouldn’t be too ar­ro­gant, be­liev­ing that it will win an over­whelm­ing vic­tory in the trade war. No one is in­vin­ci­ble. In a trade war, both sides lose. A US vic­tory is un­re­al­is­tic.

The US econ­omy un­doubt­edly shows more strength, but such strength can’t sup­port Wash­ing­ton’s goal of mak­ing China hand over its eco­nomic sovereignty. China also has great strength and China’s strength matches its de­sire for equal ne­go­ti­a­tion.

The fu­ture of the trade war won’t be dic­tated by the White House. It will be full of drama as it un­folds.

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