The Dow surged at the open Thursday. The S&P 500 and Nasdaq also trended upward, suggesting markets could break their four-week losing streak. (Andrew Kelly/Reuters)
The Dow Jones industrial average jumped more than 300 points Thursday after Beijing said it wasn’t looking to escalate the U.S.-China trade war any further, just days after back-to-back retaliatory tariffs brought the conflict to a boiling point.
“China has ample means for retaliation, but we think the question that should be discussed now is about removing the 550 billion dollars of new tariffs to prevent escalation of the trade war. China has been lodging solemn representations to the U.S. side about this,” Gao Feng, a commerce ministry spokesman, told reporters Thursday. “The most important thing is to create the necessary conditions for continuing negotiations.”
The ministry also confirmed that discussions for a face-to-face meeting in September were ongoing. Chinese negotiators had been expected to travel to the U.S. for those talks, but last week’s pandemonium raised doubts. Now, investors are hopeful that progress might be imminent, even if details are scant, said Ed Yardeni, president of Yardeni research.
“China saying that negotiations are continuing over trade talks is bullish for investors,” Yardeni said. “Investors just want this issue resolved. The Chinese have said this before, but it beats the alternative of having China say they are not interested in pursuing any further talks.”
Last Friday, Beijing introduced retaliatory tariffs on $75 billion in goods and said it would reinstate levies on auto products, prompting President Trump to raise the rates of existing and planned tariffs on Chinese goods and demanding that American business completely cut ties with China
The exchange renewed fears the standoff would tip the U.S. into recession and of a wider global slowdown, sending U.S. markets into a tailspin. The Dow Jones industrial average sank more than 600 points, or nearly 2.4 percent, while the Standard & Poor’s 500 fell 2.6 percent and Nasdaq composite erased 3 percent. But two days after the carnage, Trump painted a far rosier trade picture during the Group of Seven summit in France, saying there had been two “very good” calls with China.
Feng did not confirm Trump’s claim that China had called the U.S. over the weekend in pursuit of a deal.
On Thursday, Dow was up more than 300 points, or 1.2 percent, within minutes of the opening bell and China-exposed heavyweights like Apple and Caterpillar were climbing. The S&P 500 and Nasdaq also were trending upward, 1.2 and 1.4 percent respectively, putting the U.S. markets on track to break their four-week losing streak.
“China’s stated preference for a negotiated solution rather than reciprocating the latest tariff increases is being taken as a meaningful de-escalation,” Brendan Walsh, an analyst with Markets Policy Partners, wrote in a note to investors Thursday. “Investors’ overriding concern is that Beijing walks away from the negotiation due to overuse of pressure tactics by the White House. Next month’s Chinese trade delegation to Washington is being seen by market participants as a potentially pivotal event.”
Recession fears have spiked in recent weeks as a raft of warning signals have surfaced in the U.S. economy. The nation’s manufacturing sector has contracted for the first time in a decade, and sales of U.S. exports have decreased at the fastest pace since 2009. For the first time since the run-up to the Great Recession, the yields — or returns — on short-term U.S. bonds eclipsed those of long-term bonds. The phenomenon, known as an inverted yield curve, has preceded every recession since 1955 and signals investors are piling into safer assets.
On Thursday, the U.S. Commerce Department said the U.S. economic growth had slowed more in the second quarter than previously thought. Gross domestic product grew at an annualized rate of 2 percent, the department said, revised down from an estimate of 2.1 percent last month.
“Consumers bought more nondurable goods and spent more on services, but exports were a touch weaker and spending by state & local governments added less than the first GDP estimate a month ago,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in note to investors Thursday. “The economy is still on cruise control and growing a steady 2.0% in the second quarter as the trade wind skies continue to darken.”
Just as the trade war takes its toll on the U.S. economy, the conflict’s effects are also rippling across the globe. China’s economic growth has slowed to its lowest rate in 27 years, as factory output declines and unemployment rises, and central bank leaders in Europe, Asia and Australia have cut interest rates in recent weeks, citing the need for economic stimulus.
https://www.washingtonpost.com/business/2019/08/29/stock-futures-rise-sharply-after-china-says-its-opposed-further-escalation-trade-war/
2019-08-29 13:39:24Z
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