LIVE MARKETS-US, China trade talks critical for market outlook

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U.S., CHINA TRADE TALKS CRITICAL FOR MARKET OUTLOOK

The outcome from contentious trade talks between the United States and China will likely be key to market confidence that the worst-case scenarios from tariffs will be avoided.

Barclays Capital was the latest bank to raise its stocks target on Wednesday as analysts and investors become more confident that the worst of the trade shocks are in the past.

But talks between the United States and China remain critical to whether this outlook will remain.

“From an economics and market perspective, the China negotiations are by far the most critical of any bilateral trade talks,” Chris Low, chief economist at FHN Financial, said in a note on Wednesday.

“Returning to April tariff levels would be devastating to both the US and Chinese economies. Maintaining the levels negotiated in May would be fine for both countries. The tariff pause negotiated in May ends in August,” Low noted. But “China has signaled it will take a hard line in negotiations, implying they will wait until the deadline is looming before making concessions.”

U.S. President Donald Trump called China's Xi Jinping tough and "extremely hard to make a deal with" on Wednesday, exposing frictions after the White House raised expectations for a long-awaited phone call between the two leaders this week.

Some European auto parts plants have suspended output and Mercedes-Benz is considering ways to protect against shortages of rare earths, as concerns about the damage from China's restrictions on critical mineral exports deepen.

Until a deal between China and the Untied States is reached, “uncertainty will be the rule, and could remain beyond August if another short-term extension is negotiated,” Low said.

(Karen Brettell)

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