China Limits Stock Sales To Maintain Impression Of Stability, As Bessent Hints At Boosting Treasury Buybacks If Fed Does Nothing

Last week we explained how the escalating trade war between the US and China has gradually transformed into a theatrical war of who has the upper hand on any given day. And since it takes a long time for trade obstructions to hit the underlying economy, investors are keenly eyeing the stock, and especially FX, markets for any and every (early) indications of who has the upper hand (even if they are, as we show below, completely false).

Yet so far in the trade war, there has been one notable difference: while US stocks have tumbled (and rightfully so, as Trump institutes shock treatment to ween the US out of its debt-funded reserve currency, trade deficit addiction) and the US dollar has been in freefall, Chinese stocks have been surprisingly resilient and barely dropping, while the yuan reversed its losses last week, which pushed it to a record low only to rebound sharply higher.

There is just one problem: like everything else out of China, it's market reaction has also been 100% fake. 

While the US reaction is understandable, since the political Fed is doing everything it can to tarnish Trump's approval rating and rugpull the market, and economy, from under him... and for those who say this is nonsense, may we remind you this is precisely what Bill Dudley told the Fed to do during the first Trump trade war...