‘Xi rally’ helps fuel 428-point surge by Dow

You’ve heard about the “Trump bump.” But what about the “Xi rally”?

The Dow’s 428-point upside surprise Tuesday was powered by a speech by Chinese President Xi Jinping that defused trade tensions between the U.S. and Beijing. Stock market volatility has returned in recent weeks amid heated rhetoric from both sides in a tariff dispute that has spooked investors.

But Xi’s speech Tuesday, which never mentioned trade tensions with President Trump, was viewed bullishly by Wall Street for what he said and didn’t say. What Xi did say that investors liked was that China will lower import tariffs on autos, increase market access for foreign investors and strengthen protection of intellectual property rights.

Those moves, which had been outlined by China in 2017, took the edge off the trade fight — at least for now. It was a de-escalation investors were hoping for.

“If implemented swiftly and in full, these moves will not only help alleviate trade tensions, potentially avoiding a full-scale trade war, but will also improve China’s growth potential,” a report by a team of Goldman Sachs’ Asiabased economists concluded.

What was missing from Xi’s speech also was cheered. “There was no strong language in terms of the government’s determination to defend China’s interests,” Goldman noted. And that differs from the tougher stance taken by China’s state-run media recently.

Xi’s non-confrontational tone “took some heat out of the rhetoric,” Peter Rosenstreich of Swissquote Bank says. That allowed stocks to heat up again.