WASHINGTON, June 27 (Xinhua) -- After a wild ride in recent weeks, U.S. markets were flat on Thursday as investors wait for the weekend's meeting of the Chinese and U.S. leaders.
News of progress would bode well for U.S. markets -- or at least keep them stable -- but bad news would once again send markets into freefall. Indeed, the U.S.-initiated trade frictions with China have been key market drivers in recent months.
May saw markets plummet, with June seeing a major surge on news that the two sides will meet during the Group of 20 (G20) summit in Osaka, Japan.
The market began to cool this week, with investors waiting to see what's next. Wednesday's Dow Jones Industrial Average closed at 26,526, down just a hair from the previous day, as investors made no major moves.
The previous day also saw no big waves, as investors waited for any advance news of the trade talks. Good news such as a trade deal, or at least a commitment to continue talking, will bode well for U.S. markets, although it remains unclear how much the market would rally.
"How much the market would rally would depend on the nature of the deal that is struck," Desmond Lachman, a resident fellow at the American Enterprise Institute, told Xinhua.
"If, in the highly unlikely event that both sides declared the trade war completely over, one would expect a very strong rally. However, the best case scenario would seem to be that both sides would agree to schedule further talks to iron out differences," Lachman said.
"In that case one would get a muted rally because there would remain the uncertainty as to how those future talks would go. There is also the consideration that the market has already priced in a scenario where a truce is declared so there might not be much room for a strong rally," Lachman said.
But bad news, such as the imposition of additional tariffs on Chinese goods, would spark a market sell-off, experts said.
Barry Bosworth, an economist at the Brookings Institution, told Xinhua that the trade war is hurting U.S. consumers, who are being impacted by higher prices on purchases from China. U.S. exporters are also feeling the sting, he said, pointing to the agriculture industry, which is losing a growing share of the Chinese market.
Bosworth said he believes that the United States is an "unreliable supplier," on grounds that the White House initiated the trade war.
He added that countries may "avoid reliance on U.S. sources." Lachman noted that overall, a China-U.S. trade deal would bring a number of economic benefits. U.S. consumers would no longer have to pay import tariffs, and U.S. farmers could expect better prices for their soybeans.
China's economic prospects would also improve "and that would make for a better global economic environment," Lachman said.
Indeed, the global economy would benefit from having China, the world's second largest economy, in better economic shape. That would especially benefit big exporting countries like Germany and Japan, Lachman added.
Earlier this month, Chinese President Xi Jinping held a telephone conversation with his U.S. counterpart Donald Trump at the latter's request.
Trump said he looks forward to meeting Xi again during the G20 summit and conducting in-depth discussions on bilateral ties and issues of common concern.
The Chinese president said he stands ready to meet Trump in Osaka to exchange views on fundamental issues concerning the development of China-U.S. relations.
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