Home Markets Dow Jones Recovers After Good Sentiments from Trump’s Trade War

Dow Jones Recovers After Good Sentiments from Trump’s Trade War

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Stocks in the U.S. market, including Dow Jones, recovered from their low indexes last Friday when U.S. President Donald Trump gave some reassurance concerning the trade talks between him and Chinese President Xi Jinping on Twitter.

Now at 25,942.37, the Dow Jones Industrial Average soared from its plunged which fell by 358 points. The drastic decrease in points was followed by an increase in tariff prices on Chinese goods from 10% to 25% which President Trump imposed last Friday. “Talks with China continue in a very congenial manner – there is absolutely no need to rush – as Tariffs are NOW being paid to the United States by China of 25% on $250 Billion worth of goods and products,” President Trump tweeted on May 10.

As indicated by the S&P 500, the majority of stocks in the U.S. market were losing for four days straight before the increase of tariffs. Other major U.S. stock indexes including the Nasdaq Composite slightly recovered by the end of the trading week. Chinese Vice Premier Liu He mentioned that the last trade talks between the U.S. and China were taken well by both parties. The negotiations were constructive as noted by Treasury Secretary Steven Mnuchin. Mnuchin added that there is no official schedule for the next trade talk yet.

The trading week closed on a good note following President Trump’s tweet which reassured markets that the negotiations between the U.S. and China were alright and that an agreement was “no need to rush.” President Trump firmly clarified that “China shouldn’t renegotiate deals with the U.S. at the last minute” since the flow of the negotiations seemed to prolong the trade war up to the end of President Trump’s term in 2020.

The Leuthold Group chief investment strategist Jim Paulsen shared his thoughts regarding future trade talks, “It’s likely that it gets resolved and if it does, you’ve got to believe we’d be back at highs very quickly because around it, there’s a good story – a lot of green shoots, rates are staying low and better earnings.”

“Over the course of the past two days, the United States and China have held candid and constructive conversations on the status of the trade relationships between both countries. The relationship between President Xi and myself remains a very strong one, and conversations into the future will continue. In the meantime, the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations,” President Trump tweeted on May 11.

MV Financial investment strategist Arian Vojdani commented that the president’s “bark is worse than his bite a lot of the times.” Furthermore, Vojdani said that “we might see him try to come down a little hard, but ultimately people really don’t think we are going to see that drastic trade war play out. The administration is very keen on markets and they don’t want to see pain.”

Despite the tweets made by President Trump, companies that are dependent on the outcomes of the ongoing trade negotiations or have a large market in China did not recover. VanEck Vectors Semiconductor ETF reported a decrease of 6% which included chipmaker companies including NVIDIA. This concluded its worst week of 2019. Uber, alike, dropped from a share price of $45 to $42, or about an 8% decrease. Apple remained 1.4% down last Friday and about 7% for the whole week regardless of its popularity of iPhone and other Apple products in China.

Down on Wall Street, some people warn investors that the trade war may only be unfolding. Deutsche Bank chief Asia economist Zhiwei Zhang gave his reaction to the recent developments from the negotiations between the U.S. and China, “We continue to expect the two sides to reach a trade deal eventually, but this is unlikely to happen in the short term as the war is not painful enough for either side.”

DBS Group Research strategists at Singapore explained their take on the trade war, “In the immediate term, we would be watching to see if China retaliates against last Friday’s tariff increase. The performance of the equity markets would also be crucial. Thus far, the selloffs in China and the US indices have been minor. A more serious decline could prompt more urgency by both sides to reach a deal.”