“The underlying fundamentals, of course, haven’t changed much between Friday and Monday. The chance of a trade war didn’t decline – the probability of a trade war is now 1.0, since it has already happened. Unless you want to call an attack and counterattack a mere skirmish, rather than a trade war, there is no longer any debate about whether there will be conflict on trade; the only discussion is on magnitude. And on that point, nothing much has changed either: it was always going to be the case that the initial salvo would be stridently delivered and then negotiated backwards. I’m not sure why people are so delighted about the weekend’s developments, except for the fact that investors love stories, and the story trade war is ended!’ is a fun story to tell the gulli-bulls.”
MK note: Michael Ashton agrees with our assessment posted below under the heading China, U.S. trade barbs over who is threatening trade system – posted, by the way, yesterday morning before the 500 point reversal in the Dow.