A deal between China and the United States can cause the so-called "sell the news" effect, especially if the deal does not remove current tariffs or is not convincing enough.
Donald Trump has already announced that he is lifting his threat to raise tariffs to 25% of 10% on Chinese commodities to the tune of $ 200 billion. The deadline was March 1, but Trump seems to be pleased to cancel it. Xi also believes negotiations are going well enough.
Some strategists, however, believe that Trump may have a deal with China, but which does not fully satisfy the US, especially in the intellectual property. They say there may be changes to intellectual property, but not to change the tariff conditions. A real deal will involve many more changes related to intellectual property, regulations and restrictions.
According to Bank of America, one-third of the forecast declines in the 2019 accounts are the result of tariffs. Scenarios in which we have a real deal can reverse the direct impact of tariffs in 2018 and potentially boost sales in China. This will add back the lost 1% to EPS. Partial scenarios will have no direct impact on EPS of the S & P500 shares.
US negotiator Robert Lighthizer has a speech to Congress on Wednesday, where he can give more light on what is being discussed.
Source: CNBC
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