Trump Says "No Need to Worry About China"... Markets Rebound on Hopes for 'TACO Trade'

Asian Markets, Including Korea, Reflect Negative Factors Belatedly

Donald Trump, President of the United States, is holding a press conference before boarding Air Force One for his Middle East visit schedule on the 12th (local time). Photo by AFP

Last week, after the escalation of the US-China trade war, the possibility of a "TACO Trade" (Trump Always Chickens Out Trade, referring to trades based on the expectation that Donald Trump will always back down) by US President Donald Trump was welcomed by the US stock market and the virtual asset market. In contrast, Asian stock markets showed weakness as they belatedly reflected the shock of the US-China trade war.

According to CoinMarketCap, a virtual asset market data site, as of 9:30 a.m. on October 13, the price of Bitcoin, the leading cryptocurrency, stood at $115,322, up 4.8% from 24 hours earlier. However, compared to seven days ago, it is down 6.7%. Compared to a month ago, it has fallen by 0.7%, giving up all the gains made during the recent bull market over the past month.

At the same time, Ethereum, the leading altcoin (virtual assets excluding Bitcoin), was trading at $4,144, up 12.1% from 24 hours earlier. Other major coins by market capitalization, such as BNB (16.9%), Ripple (XRP) (6.8%), Solana (12.6%), and Dogecoin (12.4%), also showed similar upward trends.

Investor sentiment in the US stock market also improved slightly. According to Reuters, S&P 500 futures rose by 0.8% and Nasdaq futures by 1.1%. In addition, optimism about quarterly earnings for major banks such as JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup, which are set to announce their third-quarter results this week, also appeared to be a positive factor. According to LSEG IBES, third-quarter net profits of S&P 500 companies are estimated to have increased by 8.8% compared to the previous year.

This rebound in risk asset markets is interpreted as a result of the perceived possibility of a TACO Trade. On October 12, President Trump emphasized on his self-created social networking service, Truth Social, "There is no need to worry about China," and added, "The United States is not trying to hurt China, but to help." He further stated, "The highly respected President Xi just made a momentary mistake. He does not want his country to fall into recession, and neither do I."

On the other hand, major Asian stock markets are showing weakness in early trading as they belatedly reflect the aftermath of the US-China trade war. Reuters also diagnosed that political uncertainty in Japan, ahead of the selection of the next prime minister, is contributing to overall market uncertainty.

In fact, the Korea Composite Stock Price Index (KOSPI) fell below the 3,600 mark immediately after opening. The KOSPI opened at 3,350.08, down 1.6% for the day, and has been maintaining the 3,560 level during the session. The Japanese stock market was closed for "Sports Day." The Chinese stock market, having just ended the National Day holiday, is also expected to see its rally stall. Bloomberg noted, "Tensions are rising ahead of the Trump-Xi Jinping summit, which could lead to a weaker yuan and a slowdown in the artificial intelligence (AI) rally."

Amid the turbulent market situation, gold, the leading safe-haven asset, continues its upward trend. According to Bloomberg, the spot price of gold is currently $4,030.74, up 0.29% from the previous day. Gold prices soared to $4,042 on October 8, breaking through the $4,000 barrier for the first time. Although prices pulled back slightly after hitting a record high, they are now rebounding again.

Meanwhile, Jerome Powell, Chair of the Federal Reserve, is scheduled to present his economic outlook at the National Association for Business Economics (NABE) speech on October 15. This week, the annual meetings of the International Monetary Fund (IMF) and the World Bank will be attended by a large number of central bank governors from major economies around the world.