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Today both the Standard & Poor’s 500 and the NASDAQ Composite Index hit all time highs. As of 3:40 p.m. New York time on Monday, November 25, the S&P 500 was up 0.67% and the NASDAQn Composite had gained 1.26%.

There are two main drivers for the market advance today.

First, a surge in Merger and Acquisition action with big deals from Charles Schwab (SCHW), Moet Hennessy Louis Vuitton (LVMH) and EBay’s (EBAY) sale of StubHub to Europe’s Viagogo.

Second, a rather peculiar (to me at least) view of the news from China.

Today the market has decided that reports that China has offered a promise to improve protection of intellectual property are a big step forward that makes a Part 1 and then a wider Part 2 deal to end the U.S.-China trade war more likely. As I posted over the weekend, the offer is vague on enforcement and it’s certainly not clear to me that it is acceptable to the very skeptical U.S. negotiating team.

And today the market has also decided to ignore elections in Hong Kong that amounted to a massive repudiation of pro-Beijing leaders in the city. The early results reported by the South China Morning Post showed pro-democracy parties winning 278 of the first 344 seats to be declared with pro-Beijing parties taking just 42. Prominent figures in the protest movement won seats and pro-democracy parties look to have won at least 12 of the 18 district councils in Hong Kong. Before this vote, pro-democracy parties did not have a majority on any of these councils. The turnout was huge with 71% of eligible voters–2.94 million people–going to the polls.

Now it’s quite accurate to point out that district councils have very little real power with their sphere limited to very local issues such as traffic and housing. And it is very true that the political deck is heavily stacked in favor of Beijing. For example, while pro-democracy parties won all of the seats allowed to them in the 1,200 member election committee that votes for Hong Kong’s leader, that allotment is limited to 117 seats, assuring, by design that pro-Beijing groups and business interests will pick the next leader of Hong Kong.

But the vote total, as of this morning not reported in most mainland Chinese media, is a startling rejoinder to official claims that the protestors were only a tiny minority of Hong Kong residents and that a silent majority of voters approved of government efforts to shut down the protests.

Historically, leaders of the Communist Party in China haven’t reacted well to this kind of mass public protest. It cuts too close to the party’s claim to be the only voice of the people in China. Comments from China’s foreign ministry spokesperson, Geng Shuang, are about what the historical record suggests we should expect: “The most urgent task for Hong Kong at present is to stop violence, control chaos and restore order,” Geng said. “The Chinese government is unswervingly determined to safeguard national sovereignty, and to oppose any interference in Hong Kong affairs by external forces.”

The 1989 Tiananmen Square Massacre, where troops fired on demonstrators, is one end of a possible range of responses from China’s President Xi Jinping. President Xi has built has rule on an image of personal strength and national pride and that to a degree boxes him in on his repose to the Hong Kong protests. He cannot afford to appear weak.

The major–and hopeful–difference between 1989 and now is that the Hong Kong protests haven’t so far spread to the rest of China. From the government’s point of view in 1989, the biggest problem were signs that the protests in Beijing were spreading to other cities in China.

So the Hong Kong protests don’t have to end with the death of hundreds or thousands of protestors. And Xi could decide to find some accommodation with some of the demands of the protestors.

But it’s unlikely that the challenge from Hong Kong will make President Xi more inclined to negotiate away anything that–from a Chinese perspective–impinges of China’s view of its sovereignty. Or that the hardliners in the Chinese ruling inner circle will give him much room to negotiate with the United States to end this trade war.

In my opinion, the market is again being too optimistic on the prospects for a Part 1 or Part 2 trade treaty.