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Watch out for December ‘risk liquidation’ in markets if Trump meeting with Xi is a bust – MarketWatch

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- Hirdetés -

A volatile year of trading could be coming to a head this weekend.

Much seems to be riding on the meeting of the year, between President Trump and his Chinese counterpart Xi Jinping in Buenos Aires on Saturday. On the way to his plane Thursday, POTUS said a deal was close, but “I don’t know that I want to do it.”

- Hirdetés -

Ahead of that, Goldman Sach sees three possible outcomes from the weekend: 1) most likely—path of “escalation” continues with tariffs on China rising to 25%, extended to remaining imports; 2) a pause, with existing tariffs in place, but two sides keep talking, escalation on hold; and 3) complete rollback of current tariffs, which Andrew Tilton and the team at Goldman see as “unlikely.”

Here’s their ultimate tariff chart to keep things straight headed into the weekend:

Goldman Sachs Investment Research

Staying on topic, our call of the day, from Joel Kruger, currency strategist at LMAX Exchange, says the market wants some positive signals over a deal and a “feeling the White House is willing to compromise.”

“If there are any signs of fallout like the fallout seen at the APEC summit, it could spook the market into a December risk liquidation,” said Kruger, in emailed comments. Hedge fund and other investors are sitting on losses, and may be looking for a year-end exit.

Read: A dangerous ‘bear trap ‘ could be brewing for stock investors

He explains what that “liquidation” would look like: “If you look at the S&P 500, November has been a wash after the market saw a sharp reversal in October. If we take out the November low, I would expect an acceleration below the yearly low, at which point it could get ugly,” he said.


Watching the November low

Should everything come up roses in Buenos Aires, or at least hopeful on the trade front, Kruger says the S&P could establish itself back above the early November high. However, he says it’s still a stretch to “see the market in a mind-set that would have it thinking confidently about taking residence beyond the recent record high.”

Investors are still waiting for volatility to come back to the market in a “healthy way,” he says. “A lot of this comes down to rates getting back to neutral and further away from the emergency levels seen over the past decade.”

Last word goes to Jeroen Blokland, portfolio manager at Robeco, who says if we get the status quo on trade this weekend—trade war continues, but without escalation—“other fundamental factors like overall growth, earnings, valuation and more recently a somewhat more dovish Fed get the chance to play out.”

At this point, these factors are “still relatively favorable for equities. So a deal would benefit our positioning, while an escalation is the main risk to our scenario,” he said, in emailed comments.

The market

The S&P
SPX, +0.82%
DJIA, +0.79%
 and Nasdaq
COMP, +0.79%
 are struggling for traction.

It’s month-end and looking pretty ugly for crude
CLF9, -1.42%
down 21% for the month and pitching lower this morning. Gold
is easing back and the dollar
DXY, +0.42%
is up some.

Check out the Market Snapshot column for the latest action.

Read: Gas is now below $2 a gallon in these 24 states

SXXP, -0.17%
 is xxx and Asia
SHCOMP, +0.81%
 was subdued ahead of trade talks.

The chart

Our chart of the day offers up one look at the “pointless tug of war” between the bulls and the bears this year, Slope of Hope’s Time Knight.

Slope of Hope

HDGE, -0.77%
“is the only ETF I know of which shorts individual stocks with the goal of making profits,” says Knight of the chart that shows bears winning at the start of the year, giving it back and more, bulls “onto the train tracks” starting in October and a”nauseating circle-jerk” in November.

“Commissions-based brokerages are really the only ones loving a market like the one shown above,” says Knight.

Read: These five charts show how the U.S. corporate-debt party is getting out of hand

The buzz

Trade hawk, Peter Navarro, appears to be attending the G-20 after all. Spotted getting off a plane in Buenos Aires, Trump’s trade adviser has pushed hard against China, and his presence could mean a harder U.S. line at the summit. Ahead of that meeting, data Friday showed Chinese factory activity stalled in November. And German Chancellor Angela Merkel will be late after her plane had to make an emergency landing in Germany due to technical problems.

Read: This currency could take off if the G-20 summit goes well, or just isn’t a disaster

Marriott shares
MAR, -5.59%
are diving after the hotel group said a data breach may have put personal information of up to 500 million guests at risk.

Facebook’s chief
FB, +1.39%
 operating officer, Sheryl Sandberg, reportedly ordered a probe into George Soros after he criticized the social network at Davos earlier this year, says The NYT.

HPQ, +0.61%
 is up on better-than-expected results, and said it could have sold more PCs if it weren’t for some headwinds like China tariffs. GameStop
GME, -6.63%
 is tanking on weak guidance.

Read: Autonomy founder faces criminal charges over his role in Hewlett Packard acquisition

SBUX, -0.24%
 says no more porn surfing at its coffee shops.

The Trump Organization was ready to gift Russian President Vladimir Putin a $50 million penthouse in the proposed Trump Tower Moscow during the 2016 election, says BuzzFeed. The idea was that all the oligarchs would want to live there too.

Chicago PMI is the only data on the docket for Friday.

Random reads

A killer pig virus is working its way to China’s major cities

Over a third of caravan migrants in Tijuana are suffering serious health issues

Body camera shows deputy sheriff’s harrowing escape from Paradise fires

Watch a child recreate Trump’s UN-laughter moment in this Air New Zealand Christmas ad

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