US-China row blocks Apec communique
PENCE SHARPENS ATTACK ON BEIJING AT SUMMIT FUELLING FEARS OF NEW COLD WAR
Asia-Pacific leaders failed to reach a consensus on the wording of a communique after two days of talks in Papua New Guinea, reflecting heightened tensions fuelled by a trade war between the US and China.
The Asia-Pacific Economic Cooperation (Apec) leaders have never previously failed to agree on a statement since they began meeting annually in 1993.
Vice-President Mike Pence sharpened US attacks on China, most notably with a call for nations to avoid loans that would leave them indebted to Beijing. He said the US wasn’t in a rush to end the trade war and would “not change course until China changes its ways” — a worrying prospect for a region heavily reliant on exports.
“The language we heard from Pence is quite concerning because it shows we’re moving towards a zero-sum game geopolitics in the AsiaPacific,” said Jonathan Pryke, a researcher specialising in the Pacific at the Lowy Institute, a Sydney-based research group. “The great hope of convergence between China and the US is becoming less and less of a likely reality.”
The meetings last week produced little to suggest US President Donald Trump and his Chinese counterpart Xi Jinping would reach a deal when they meet in a few weeks at the Group of 20 summit in Argentina.
The developments are expected to impact markets when they open today. Markets on Friday rose slightly following comments from Trump that he may not impose more duties on Chinese products. The US has already placed $250 billion (Dh918 billion) worth of tariffs on Chinese goods. Xi has retaliated with duties on $110 billion in US imports.
The leaders have never previously failed to agree on a statement since 1993, when they began meeting annually
Conflicting signals from the US and China about their trade relationship will be on investors’ minds when markets open today.
Trump suggested on Friday that China may not impose more duties on US products, soothing frayed investor nerves, but Wilbur Ross, the US commerce secretary, said that trade deal with China was “impossible” before January. Then on Saturday, Chinese President Xi Jinping and US Vice-President Mike Pence traded barbs at a summit as both tried to blame each other for protectionist measures.
Market participants bought into the indications from Trump, which triggered a recovery on the Dow Jones Industrial Average on Friday, but experts are now sounding a different tone with developments in the past 48 hours.
“The market reacted positively to Trump’s tweet. The lack of information on the trade war sounds like Trump is trying to trump the market down. [The] market would look to see any tangible news and till then markets would continue to be choppy,” Nadi Bargouti, head of asset management and managing director at Emirates Investment Bank, told Gulf News.
Trump is due to meet with China’s President Xi Jinping later this month in Buenos Aires on the sidelines of the Group of 20 (G20) leaders summit.
Friday close
On Friday, the Dow Jones Industrial Average (DJIA) closed 0.49 per cent higher at 25,413.22, recovering partial losses of 1.8 per cent registered in the week. The S&P 500 index closed with marginal losses of 0.22 per cent to be at 2,736.27.
However, going ahead, weak guidance from US companies is making experts cautious. “US equities continue to trade at ever higher levels, as earnings have been supportive. A general impression is that is a weak guidance from US companies. Earnings have been up 26 per cent year-on-year and it is impossible to sustain going forward. The 17-times forward earnings in the US [are] dangerously excessive,” Bargouti said.
The DJIA has gained more than 2.3 per cent so far in the year, while the S&P index has gained 1.5 per cent as higherthan-expected growth fed into company earnings, while expectations of a faster-thanexpected rise in interest rates, and fears of a trade war have kept the upside limited.
“The attractiveness of US equities is [a] lack of better alternatives. US markets [are] the safe haven for investors in choppy markets. [Emerging markets} have their own issues in terms of trade wars. Investors are nervous on what to do next with their US holdings,” he added.