Stocks rally | China playing the long game | How low can bond yields go?

WED, AUG 28, 2019

EVENING BRIEF

AS OF WED, AUG 28, 2019 • 04:00 ET

DJIA		26035.42
		+1.00%	+257.52

S&P 500		2887.97
		+0.66%	+18.81

NASDAQ		7856.88
		+0.38%	+29.94

Most Active

DOW
NAME	LAST	CHG	%CHG
PFE	35.08	+0.74	+2.15%
MSFT	135.56	-0.18	-0.13%
AAPL	205.53	+1.37	+0.67%

S&P 500
NAME	LAST	CHG	%CHG
AMD	30.78	+0.58	+1.92%
GE	7.94	+0.01	+0.13%
BAC	26.86	+0.39	+1.47%

NASDAQ
NAME	LAST	CHG	%CHG
AMD	30.78	+0.58	+1.92%
ADSK	140.08	-10.13	-6.74%
SIRI	6.13	+0.07	+1.16%

EDITOR'S NOTE

Stocks ended Wednesday on a high note, but the gains were capped thanks to a key part of the U.S. yield curve inverting and adding to fears of a recession.

Traders have also been closely watching (and reacting to) trade war developments between the world's two largest economies. But if Deutsche Bank has it right, those on Wall Street might not want to hold their breath for a solution.

China is gearing up for a battle that could last as long as the U.S.-Japan trade war in the 1980s, which spanned more than a decade, according to Yi Xiong, China economist at Deutsche Bank. In a note to clients Wednesday, Xiong said the time horizon China is getting ready for may go well beyond the lifecycle of the current U.S. administration.

President Donald Trump shocked markets by abruptly ending a trade truce earlier this month and announcing a 10% tariff on $300 billion of Chinese goods. China retaliated with smaller tariffs ranging from 5% to 10% on $75 billion in U.S. goods. That move by China was not to maximize damage, but to "disincentive further U.S. tariffs," Xiong said.

In the past year, the trade war has morphed into a technology war with tariffs as a tool for Trump to get leverage on other issues including currency manipulation and agriculture buying, CNBC's Yun Li writes. The Trump administration blacklisted Chinese telecom giant Huawei for national security concerns and halted its ability to purchase U.S.-made chips, while Trump claimed that China failed to buy U.S. farm goods "in large quantities" as it had promised.

As Deutsche Bank's Xiong put it, "frictions between the US and China have gone far beyond trade, reducing China's potential gains in a trade deal" and if China had "hoped before that resolving the trade war could help improve overall U.S.-China relations, that hope is largely gone."