The precise US-China deal might make buyers hope that 'globalization hasn't ended'

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President Donald Trump (L) shakes hand with China's President Xi Jinping at the end of a press conference at the Great Hall of the People in Beijing on November 9, 2017.

Fred Dufour | AFP | Getty Images

President Donald Trump (L) shakes hand with China’s President Xi Jinping at the end of a press conference at the Great Hall of the People in Beijing on November 9, 2017.

Stock markets globally have to some extent recovered from a sell-off last December and could move higher if a “positive surprise” comes out of the trade deal between China and the U.S., according to financial services company CLSA.

“I think there’s room for further rally if there’s a positive surprise on the deal. What’s the positive surprise? It’s that they drop the existing tariffs,” Christopher Wood, global equity strategist at CLSA, told CNBC’s Sri Jegarajah on Thursday.

Wood was referring to the additional tariffs that China and the U.S. imposed on each other’s products last year when tensions between the two economic giants were escalating. Washington slapped new levies on $250 billion worth of Chinese imports, while Beijing did the same on $110 billion in American goods.

U.S. President Donald Trump and Chinese President Xi Jinping agreed in December to not implement further tariffs while representatives from both sides work to negotiate a deal.

The two countries reaching an agreement and dropping the additional tariffs imposed last year would lead investors “to think that maybe globalization hasn’t ended,” which would boost sentiment and spur a rally in markets, according to Wood. But that rally would be short-lived if investors began to worry that the U.S. Federal Reserve could raise interest rates again, he said.



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