By Clay Chandler and Eamon Barrett
November 3, 2018

Global stock markets were whipsawed this week by conflicting signals from the White House about President Trump’s offer to host a dinner with Chinese president Xi Jinping after this month’s Group of 20 summit in Argentina. Trump inspired a burst of euphoria among investors Thursday morning by tweeting that he had just concluded a “long and very good conversation” with Xi and that discussions with China were “moving along nicely.” Later in the day, his economic adviser Larry Kudlow stoked optimism by telling reporters there may be a “thaw” between the US and China on trade.

There was a moment of uncertainty Thursday afternoon, when US attorney Jeff Sessions unveiled the latest of a series of charges of Chinese theft of US trade secrets. But at a rally in Missouri that night, Trump remained upbeat. The Chinese “want to make a deal,” he declared, adding: “Lots of great things are going to happen over the next short period of time. It’s going to work out good.”

Word of the G20 meeting, combined with Trump’s upbeat comments and a Bloomberg report late Thursday suggesting White House officials already are drafting terms of a US-China trade deal, spurred a sharp surge in Asian stock markets Friday (Thursday night US time), which spilled over into a 200 point gain in the Dow Jones Industrial average Friday morning. Trump took to the White House lawn and seemed to bless the rally. “We’ve had very good discussions with China,” he told reporters. “We are much closer to doing something.”

And then, on Friday afternoon, the White House spin cycle lurched into reverse. Kudlow appeared on CNBC and pooh-poohed talk of a trade breakthrough. “There’s no massive movement to deal with China,” he said. The administration is doing “normal, routine preparation” for Trump’s meeting with Xi. The Dow surrendered the morning’s gains and ended the day down more than 100 points.

What’s really going on? Cynics say Trump is trying to talk up the stock market ahead of this week’s midterm elections. Vanity Fair suggests that Kudlow, wittingly or not, had “blown up” Trump’s midterm Hail Mary. True or not, the outcome of those elections will alter the power dynamics when Trump and Xi meet next. If, as many analysts predict, the election produces a “blue wave” that overturns the Republicans’ House majority, will Trump decide its time for a China truce? Or will he simply double down?

More China news below.

ceo_attribution author=”Clay Chandler” email=”clay.chandler@timeinc.com” twitter=”claychandler”]

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