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While the media is celebrating markets notably higher, market-watchers are paying attention to the total lack of follow-through since the initial surge at last night's futures open. The S&P futures is still glued around the Maginot Line of 2800...

...exactly what JPM's "base case" (which correctly predicted that a Truce - in which existing tariffs stay in place - is the most likely outcome with a 70% chance, while also accurately predicting a 3 month ceasefire), the agreement will be enough to get the S&P to 2,800...

But, as Bloomberg's Garfield Reynolds notes, the rally in risk assets triggered by a ceasefire in the U.S.-China trade war looks overblown. An enormous amount of work remains before a lasting peace can be reached, making Monday’s moves difficult to trust.

Those tempted to believe a Santa Claus rally will wipe out a lot of 2018’s pain should note that little of substance has changed. The U.S. and China weren’t even able even to agree on a joint statement, and China has censored the American embassy’s web post on the leaders’ talks.

The main thing both sides agree on, it seems, is a desire for the bleeding in equities to stop. The problem then becomes that every rally breeds the seeds of its own doom, by reducing the impetus for a deal.

Monday’s feverish market reaction obscured a slew of dreadful data that underscored just how much damage the trade war has already done.

  • PMIs out Monday for South Korea, Taiwan and Malaysia all came in notably weak, following the lead from China’s official PMI on Friday.

  • South Korean trade data over the weekend missed estimates and included the first drop in exports to China for more than two years.

  • Japan’s capital spending also missed badly.

Global growth is slowing, with Asia bearing much of the brunt, amid disruptions to supply chains that may even worsen should companies try to reverse moves made earlier in the year aimed at coping with tariff hikes.

A 90-day truce won’t provide the clarity businesses need as they put the finishing touches on planning for next year.

The size of Monday’s rebound itself demonstrates just how dangerous the confrontation between the U.S. and China is for the global economy.

Even if the truce does lead to a long-term resolution, the damage already done looks too deep to be overcome as rapidly as the current rebound seems to be pricing in.

So Monday’s action has the potential to turn into a head-fake rally that ends up leaving equities worse off than they were before the G-20.