Stocks fall augurs trade war uncertainty

Source:Global Times Published: 2018/10/11 22:03:41

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.

Posted in: EDITORIAL

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