China trade comments lift Wall Street as tech, industrials lead
DJIA up 362.46 pts
NEW YORK, Aug 29, (RTRS): Wall Street’s main indexes rallied on Thursday, led by the tradesensitive technology and industrial sectors, as China sounded hopeful on trade negotiations with the United States, easing concerns that more combative stances could stoke a recession.
China’s commerce ministry said both sides are discussing the next round of talks scheduled in September but progress would be determined by whether Washington could create favorable conditions.
“President Donald Trump said in a Fox News radio interview that trade talks were scheduled for Thursday “at a different level,” but did not provide additional details.
“Certainly (trade) is the fundamental point that is occurring right now, all this other stuff is just noise that allows either the computer programs or the certain participants in the marketplace to go ahead and push the market around one way or the other,” said Keith Bliss, managing partner and CEO of IQ Capital USA LLC in New York.
“When the market pukes the way it has done lately, and the volatility really spikes, people should be in there buying the market with both hands.”
Heavyweight tech stocks with tariff exposure, such as Apple, up 1.59% and Microsoft, up 2.02%, boosted the technology sector by 1.87% and put it on track for its best day since Aug. 13.
Chipmakers, which draw a large part of their revenue from China, also gained, sending the Philadelphia semiconductor index up 2.57%.
Industrial names that have also been highly correlated to trade progress, such as United Technologies, advanced, with the sector up 1.96%.
The Dow Jones Industrial Average rose 362.46 points, or 1.39%, to 26,398.56, the S&P 500 gained 40.25 points, or 1.39%, to 2,928.19 and the Nasdaq Composite added 126.65 points, or 1.61%, to 7,983.54.
Still, the three main indexes were on course to log their worst monthly performance, and first monthly decline, since a selloff in May, on worries the intensified trade battle between the world’s two largest economies will lead to a global recession.
The Trump administration on Wednesday made official its additional 5% tariff on $300 billion in Chinese imports and set collection dates of Sept 1 and Dec 15, prompting several hundreds of U.S. companies to warn of price hikes.
A number of companies, including Best Buy Co Inc and Abercrombie & Fitch Co, reported results earlier in the day and warned of the impact from tariffs on their sales.
Shares of the US consumer electronics retailer slid 8.16%, as one of the worst performing issues on the S&P 500, while those of the teen retailer tumbled 13.63%.
Dollar General Corp was the best performer among S&P 500 companies as its shares jumped 11.08% on an upbeat full-year profit forecast and the S&P retail index climbed 1.79%. Advancing issues outnumbered declining ones on the NYSE by a 3.5-to-1 ratio; on Nasdaq, a 3-to-1 ratio favored advancers.
The S&P 500 posted 26 new 52week highs and no new lows; the Nasdaq Composite recorded 38 new highs and 47 new lows.
European shares rose after a weak open on Thursday, boosted by a rally in Italian shares, with positive comments from China on its trade talks with the United States helping sentiment.
China’s Commerce Ministry said both sides “should create conditions” for progress in negotiations and that China was against escalating the trade war and was willing to resolve the issue calmly. “There seems to be some easing of trade worries that is giving a bit of boost to risky assets and stocks in particular,” said Simona Gambarini, markets economist at Capital Economics in London.
The gains in markets were largely broad-based and the benchmark index , which was flat in early trading, rose 0.61% by 0755 GMT.
Italian stocks .FTMIB rose 1.33% to hit its highest level since Aug 2 as President Sergio Mattarella is expected to give two former political enemies, the 5-Star Movement and Democratic Party (PD), a chance to form a new government on Thursday.
“The news is being welcomed because it’s certainly a better option than a League-led government,” said Gambarini.
“That said, the 5-star Movement and PD notoriously have not had much in common in the past and it remains to be seen whether the coalition will last.”
However, worries lingered in the markets.
The benchmark European index
is on track to end August about 3% lower as an inversion in the U.S. Treasury yield curve showed investors were concerned about economic growth in the face of a trade war that is now in its second year.
Fears of a disorderly Brexit weighed on Britain’s mid-cap index .FTMC, which slid for a second day in a row, after Prime Minister Boris Johnson decided to suspend Britain’s parliament for more than a month before Brexit.
Johnson’s move also increases the chance of him facing a vote of noconfidence in his government, and possibly an election.
British IT group Micro Focus slumped 29.8% to trade at the bottom of the STOXX 600 after it warned on profit, citing lower spending by clients. Bouygues rose 4.9% after the French conglomerate reported a better-than-expected firsthalf core operating profit.
London’s main index jumped on Thursday asChina’s fresh comments on possibly resolving the longdrawntrade spat with the United States lifted investor spirits, whileexporter stocks gained as sterling fell after the suspension ofparliament raised concerns of a no-deal Brexit.
The main index added 1%, as internationally exposedfirms such as and AstraZeneca rose andoffset a 32% plunge in Micro Focus after the IT groupwarned on its full-year revenue.
The FTSE 250 midcap index .FTMC ended up 0.4%, with gainscapped due to a more than 50% drop in consumer credit providerAmigo Holdings following an annual forecast cut. Following a subdued start to the session earlier in the day,investor sentiment swiftly picked up as China’s
commerceministry said Beijing and Washington were discussingface-toface trade talks that were scheduled to be held inSeptember.
The news was a welcome relief to stock markets, which haveseen the trade dispute stoke fears of an impending recession inrecent weeks.
The FTSE 100 is still on course for its sharpest monthlydrop in four years.
“The unfortunate reality is that these comments are likelymore hot air but with everything that’s happening at the moment,they do provide rays of hope,” said Oanda senior market analyst Craig Erlam.
Constituents of the exporterheavy FTSE 100 also foundsupport in a drop in sterling value after Prime Minister BorisJohnson’s plan to suspend parliament. The move has enraged hisopponents as it limits the time available to prevent Britaincrashing out of the European Union without a deal in October.
“The calculation here would be that the Prime Minister istaking a high stakes gamble on forcing a vote of no confidenceand daring MPs to push him towards calling a general election,”CMC Markets analyst Michael Hewson said.
Among single stocks, technology company Smiths Group was the biggest riser among bluechips after GoldmanSachs raised its rating on the stock.
Mid-cap Tullow Oil fell 5.1% after the oil and gasexplorer said its plan to sell another stake in a Uganda projecthas been called off due to a tax dispute with the Ugandan authorities. At the other end of the spectrum, oilfield service provider Hunting HTG.L jumped 5% on its best day since January asstrong activity in the United States drove demand for itsequipment, thereby boosting earnings.