Home News US-China Trade Truce Cause Dow to Increase Over 250 Points

US-China Trade Truce Cause Dow to Increase Over 250 Points

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As soon as the two presidents, Donald Trump of America and Xi Jinping of China, agreed upon a trade cease-fire, the U.S. stock markets increased on Monday.

The trade war between the two countries has negatively affected the global stocks for the most part of 2018.

In mid-morning trading, stocks have reached their highs. The NASDAQ Composite acquired 1.5 percent at 7,441.51. S&P 500 achieved 1.1 percent at about 2,790.37. Apple reached 3.5 percent and Amazon 4.9 percent. But Dow Jones Industrial Average gained 287.97 points, and by mid-morning had risen up to 442 points.

Chief investment strategist, Bruce Bittles of Baird, has a say on the matter. He thought that people are overreacting about the truce. He added that this news does not fix any long-term problems. While the market was expected to be happy with the news as it has removed some of the burden, but the elation was unnecessary.

Bittles said that there are several other problems that the U.S. and China have to deal with. These include U.S. goods non-tariff barriers and intellectual-property theft.

The copper and oil industries hope to experience good results in the global economic growth with this trade agreement between the two leaders.

Presidents Trump and Jinping, met at the G20 summit in Argentina on Saturday dinner. They agreed to postpone any additional tariffs on the goods of either country. This will begin in January and welcome further talks.

The U.S. would leave tariffs at 10 percent, amounting to over $200 billion worth of Chinese items. But as stated by the White House, the rate will increase by up to 25 percent if China and U.S.  fail to reach an agreement after 90 days.

The talks regarding trade will include intellectual property and forced technology transfer.

When President Trump tweeted about the trade agreement, including the cutting of tariffs on U.S. cars that are sold to China, the shares of Tesla, General Motors, and Ford have leaped 1.8 percent.

When Merrill Lynch of Bank of America said the trade truce of the U.S.-China indicates a 20 percent uptick for the stock, Caterpillar increased by 2.4 percent. Boeing rose 3.8 percent, while Nvidia, Micron and Chip stocks climbed up 3.5 percent.

With steel stocks, AK Steel increased 6 percent and the VanEck Vectors Steel ETF (SLX) jumped to 3.2 percent. Deere stocks rose 4.7 percent, while soybeans gained 1 percent.

As reported by the White House, to cut down the trade balance between the two, China agreed in Argentina to buy a substantial amount of industrial, energy, agricultural, and many other U.S. products. However, the exact amount is not yet specified.

China has put tariffs on the U.S. products worth $110 billion.

This trade ceasefire has a long way to go, according to Qiao. But, there is a pattern showing here about how Trump deals.

Last week, the Dow gained over 5 percent in anticipation of a trade cease-fire. Over the weekend, the two companies, Boeing and Caterpillar shares have led the pack. Both companies have plenty of free trade with China.

Treasury Secretary Steven Mnuchin stated that he was hopeful that the talks between the two leaders could result in a concrete trade agreement.

Chief investment officer at UBS Global Wealth Management, Mark Haefele, said that the market regards the news for risk assets as modestly positive. The rivalry between the two nations is not something to overcome easily, particularly with regard to market access and intellectual property. Haefele added that a breakdown of discussions will always be a risk for the global economy and stock markets.