Note that Trump likes to do deals: Christopher Wood

Indicating that there could be light at the end of the tunnel, global head of equity strategy at Jefferies, Christopher Wood on Friday said that despite the escalating US-China trade tension, it should be remembered that the US President Donald Trump "likes to do deals". In his popular note to investor Greed and Fear, Wood wrote that as the American presidential elections are nearing, Trump faces a choice between being the President that secured the `best deal` with China or ran on anti-China tweets, giving up a deal.

"That the Donald`s tone keeps changing in the tweets suggests he has not yet made up his mind on this critical point. Still it should always be remembered that he likes to do deals," Christopher Wood wrote.

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Wood suggested that Trump`s increasingly contradictory nature of the "tweet storm" will convince Beijing that it has the leverage, most particularly as the American president changes tone the moment that US stock market starts declining.

He added that investors should prepare themselves for a continuing slowdown in China growth, specially in the absence of an aggressive stimulatory response. 

It said that in many respects the Chinese economy could have been worse this year were it not for the surprising resilience so far in two important areas, namely exports and resident property. 

"Still there is one area which could enjoy a decent pickup on a 12-month basis given the weakness of the previous 12 months. That is the auto sector. China auto sales declined by 11.3 per cent YoY in the 12 months to July," said the note.

Christopher Wood on the two major risk factor on the global economy and the equity market has maintained that "First, on the trade war issue, China is not going to succumb to Trump bullying and mainland China has no sympathy with the Hong Kong demonstrators.

Last week the global equity markets were rocked by yet another escalation in trade tension between the world`s two biggest economies US and China. 

Donald Trump last week had increased the existing 25 per cent tariffs on $250 billion worth of imports from China to 30 per cent from October 1, and levied a 15 per cent tariff on the remaining $300 billion of Chinese exports.