U.S.-China trade hopes give stocks a lift
Investor sentiment also buoyed by deal that would avoid a U.S. government shutdown
U.S. stocks rose Tuesday as optimism that U.S. and Chinese negotiators were making progress toward a broad outline of a trade agreement eased some of investors’ trepidations.
The Dow Jones Industrial Average added 224 points, or 0.9%, to 25256 in early morning trading, while the S&P 500 gained 0.8%. The Nasdaq Composite also rose, adding 0.8%.
Negotiation teams from the U.S. and China are meeting this week to narrow the gap between concessions China is willing to offer and what the Trump administration will accept. Midlevel officials between the two countries met on Monday, to be followed by a higherlevel delegation led by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin later this week.
Still, a final outcome on trade appears far off, and President Trump last week appeared to rule out a meeting with his Chinese counterpart by the March 1 deadline—increasing investor worries about trade tariffs and their impact on corporate profits and economic growth.
David Zahn, head of European fixed income at Franklin Templeton, points out that many investors see the trade talks as a short-term issue for markets centered around trade imbalances rather than a longer-term U.S.-China rivalry.
“This is going to be an ongoing theme for probably the next decade or more,” Mr. Zahn said. “We’ll get something fixed and we’ll come back and we’ll get another issue, so this is something that markets will learn to deal with.”
Investor sentiment was also buoyed by an agreement in principle among U.S. lawmakers late Monday, which would avoid another partial government shutdown later this week. The deal would provide $1.38 billion of funding for 55 miles of modern physical barriers along the border with Mexico, below President Trump’s initial demands.
Elsewhere, the Stoxx Europe 600 was up 0.6% after data showed the U.K. economy grew at its slowest pace in six years in 2018 as the protracted Brexit negotiations weigh on investment.
Asian markets were also higher, led by Japan’s Nikkei, which gained 2.6%. Hong Kong’s Hang Seng Index added 0.1% and the Shanghai Stock Exchange climbed 0.7%.
This week, investors will be watching closely as the latest U.S. economic data is published, including December retailsales figures on Thursday and inflation figures on Wednesday. Economists surveyed by The Wall Street Journal expect inflation to have pulled back on an annual basis.
Continued concerns about when the U.S. economy will slow are “overly pessimistic,” said David Slater, portfolio manager at London-based hedge fund Trium Capital, who said he sees the sharp drop in global equities in the last quarter of 2018 as one possible explanation for that market gloom.
“That, as a whole, would encourage cautious sentiment,” Mr. Slater said.