It has been long time since a G-20 meeting is as consequential to world economy and politics as the upcoming one in Argentina. Risk of cancellation between of Trump and Putin meeting. U.S., Canada and Mexico to sign a trade deal. Potential of some type global agricultural deal. The presence of Saudi crown prince MBS and how world leaders will react. Most importantly is the meeting between President Trump and President Xi to see if they can reach any type of trade deal. The markets are hoping for some type of de-escalation on various fronts, with U.S-China negotiations being the most important one. WSJ writes;

Credit Suisse China analysts say a best-case outcome from the G-20 would involve promises by Beijing to buy more from the U.S. and continue to open up its markets to international investors. But they gave this a less than 10% chance of occurring.

By comparison, they placed a 25% probability on no agreement whatsoever and continued threats of new tariffs, which they say would lead to a sharp correction in markets. Their central case is for a partial cease-fire for 6-12 months in which no new tariffs would be imposed, except potentially those that have already been announced.

There are basically three scenarios;

  1. Grand Bargain Deal: A deal between the countries: Markets would love this.
  2. Incremental Steps: Some type of deal or statement about smaller deals. Markets would not be sure how to interpret this outcome.  
  3. Total Disaster:  Nothing happens. The Chinese will not offer any concessions to the U.S. Markets would take this very badly as trade war would escalate.

Last 3 days increases in the markets indicate markets that believe in some type of positive outcome from G-20. Could it all be false hope though? Earlier The Chinese outlined the type of concessions they are willing to make. Bloomberg notes;

Chinese officials have outlined a series of potential concessions to the Trump administration for the first time since the summer as they continue to try to resolve a trade war,

The commitments for now fall short of the type of major structural reforms that President Donald Trump has been demanding

Most of the document appeared to be a rehash of previous changes already made by Beijing, such as raising equity caps on foreign investment in certain industries

The White House have made it very clear that they want proper concessions and what has been offered by the Chinese is not enough. According to Politico Trump stated in no good deal is reached;

He expects to move forward with plans to increase tariffs on $200 billion in Chinese goods to 25 percent — and he threatened to impose tariffs of either 10 or 25 percent on an additional $267 billion in Chinese imports

The markets have had several head-fakes with hopes of announcement of trade deals. Every single time President Trump have come out and made it clear unless he receives what he wants, he will continue the trade war. With recent news of GM (GM US) closing factories in U.S. while expanding globally, especially in China will probably help President Trump in asking for deep concessions from the Chinese.