Global markets mixed after US-China trade agreement
No provisions to limit climate change Crude oil drops, dollar gains
BEIJING, Dec 16, (AP): Global stock markets were mixed Monday following a US-Chinese trade deal that disappointed some investors.
London, Frankfurt and Shanghai advanced while Tokyo and Hong Kong declined.
The interim “Phase 1” agreement announced Friday was in line with expectations. The two sides agreed to reduce some punitive tariffs imposed in their fight over China’s technology ambitions and trade surplus. Beijing agreed to buy more American farm exports.
Market choppiness reflects concern “the details were disappointing,” said Mizuho Bank in a report.
London added 1.6% to 7,476.69 points and Frankfurt’s DAX advanced 0.6% to 13,355.19. France’s CAC 40 added 0.8% to 5,965.21.
On Wall Street, the future for the benchmark Standard & Poor’s 500 index rose 0.2% and that for the Dow Jones Industrial Average was unchanged.
On Friday, the S&P 500 index added less than 0.1% to a new alltime high. The Dow inched up less than 0.1%. The tech-heavy Nasdaq also hit a new high, gaining 0.2%.
Asia
In Asia, the Shanghai Composite Index gained 0.6% to 2,984.39. Tokyo’s Nikkei 225 lost 0.3% to 23,952.35 and Hong Kong’s Hang Seng index shed 0.4% to 27,568.97.
Seoul’s Kospi retreated 0.1% to 2,168.15. Sydney’s S&P-ASX 200 gained 1.6% to 6,849.70 and India’s Sensex advanced 1.6% to 41,052.73. Taiwan gained, while New Zealand retreated and Singapore was unchanged.
China reported unexpected strong November factory activity and spending.
Industrial production rose 6.2% from a year earlier, up from the previous month’s 4.7%. Retail sales growth rose to a five-month high of 8% from October’s 7.2%.
The US-Chinese deal averted tariff hikes planned for Sunday on imports from both sides, but the impact on economic growth will be limited, said Citigroup economists.
The two sides also agreed to roll back some punitive tariffs, but investors already had factored that into their plans.
“We believe the net effect on China’s growth is largely neutral,” said Citigroup.
Hong Kong’s Hang Seng index lost 0.4% to 27,585.18. The Shanghai Composite Index was up less
In this Friday, Dec 13, 2019 file photo, trader Robert Charmak works on the floor of the New York Stock Exchange. Stocks are opening higher on Wall Street on Dec 16, following gains overseas as China reported encouraging
news on its economy. (AP)
than 2 points at 2,969.52 and Tokyo’s Nikkei was flat at 24,023.65. Seoul’s Kospi was off less than 2 points at 2,168.27.
Sydney’s S&P-ASX 200 gained 1.8% to 6,859.80 and India’s Sensex opened down 5 points at 41,004.98.
Taiwan gained, while New Zealand retreated and Singapore was unchanged.
US
US stocks rallied in morning trading on Monday, rising with European and several Asian markets after China reported surprisingly strong signs of life.
Growth in factory activity and retail sales in the world’s secondlargest economy both beat analysts’ expectations for last month. That layered on top of optimism from last week’s long-awaited “Phase 1” trade deal between China and the United States, which removed some of the uncertainty that’s hung over businesses and investors.
The interim trade deal is one of a “trifecta of positive catalysts” that swept through the market last week and could help support it through the end of the year, Morgan Stanley strategists wrote in a research note. The others are a Federal Reserve that appears committed to keeping interest rates low and the potential for an orderly exit by the United Kingdom from the European Union following last week’s UK elections.
Monday’s rally was broad, with roughly 80 % of the stocks in the S&P 500 rising. Energy stocks were at the head of the pack after the price of oil added to its gain last week. Financial stocks were also strong on expectations that a healthier economy and higher interest rates will boost their profits.
The S&P 500 was up 0.8% as of 11:05 a.m. Eastern time. It’s on pace for its fourth straight gain.
The Dow Jones Industrial Average rose 182 points, or 0.6%, to 28,317, and the Nasdaq composite was up 1 %.
China’s industrial production rose 6.2% from a year earlier, up from the previous month’s 4.7%. Retail sales growth rose to a five-month high of 8% from October’s 7.2%.
The interim “Phase 1” trade agreement announced Friday was relatively modest but in line with the investors’ expectations. The world’s two largest economies averted tariff hikes planned for Sunday on imports from both sides, and the impact on economic growth will be limited, according to Citigroup economists.
“With some trade uncertainty removed last week, investors should start feeling more confident that China will be able to keep their economy growing at 6% or better in 2020,” said Edward Moya, economist with Oanda.
Treasury yields rallied. The 10year yield rose to 1.86% from 1.82% late Friday.
Higher rates can mean bigger profits for banks making loans and more interest income for insurers, brokerages and other financial companies. Bank of America rose 1.8%, Wells Fargo gained 1.3% and JPMorgan Chase added 1.4%. Financial stocks in the S&P 500 overall gained 1 %.
Stocks that pay big dividends, meanwhile, were lagging the market because higher interest payments for bonds and other investments can lure away some income-seeking investors. Real-estate investment trusts slipped 0. 5 %, the only sector among the 11 that make up the S&P 500 to fall. Utility stocks, which are also big dividend payers, were close to flat.
Energy stocks were the market’s best performers, rising 1.6%, after the price of oil added a bit to its gain last week. Natural gas prices jumped. Oil and gas producer EOG Resources climbed 3%, while Exxon Mobil added 1.4 %.
Benchmark US crude rose 17 cents to $60.24 per barrel and is close to its highest level since May.
Brent crude, the international standard, added 35 cents to $65.57 per barrel, and natural gas jumped 7 cents, or 3.2%, to $2.37 per 1,000 cubic feet.
Market choppiness reflects concern “the details were disappointing,” said Mizuho Bank in a report.