Thursday July 12th

11-07-2018

Dow jumps 200 points as trade fears ease

Stocks opened higher on Thursday as trade fears declined amid a lack of retaliatory tariffs by China to the latest round of charges by the U.S. The Dow Jones Industrial Average rose 203 points with Caterpillar as the best-performing stock in the index. The S&P 500 gained 0.5 percent with industrials and energy outperforming. The Nasdaq Composite also advanced 0.5 percent. The U.S. unveiled on Tuesday a list targeting $200 billion worth of Chinese goods for a 10 percent import tariff. Stocks fell sharply on the news, with the Dow snapping a four-day winning streak. Eric Freedman, chief investment officer at U.S. Bank Wealth Management, said the lack of an immediate response by China is a positive for the market. He also noted that, while these tariffs are aimed at several Chinese imports, "the mixture of goods is different from that of the first round of tariffs. Also, they don't come into effect until August." The Chinese commerce ministry said Thursday that China has not been in touch with the U.S. about restarting trade talks, but noted that China does not want a trade war. A spokesman for the ministry said, however, China does not fear a trade war. Last week, the U.S. slapped tariffs on $34 billion of Chinese goods. China responded to the tariffs by imposing its own retaliatory levies on imports from the States. Investors also shifted their focus toward earnings and data, taking a breather from trade war concerns. On the earnings front, Delta Air Lines reported better-than-expected quarterly results. Wall Street expects strong numbers from Corporate America, with FactSet forecasting 20 percent earnings growth for the second quarter. Weekly jobless claims fell to 214,000 last week and the consumer price index rose at its fastest pace in six years. Equities also rallied on dealmaking activity as Broadcom agreed to buy CA Technologies for $18.9 billion in cash. The deal values CA stock at about $44.50 per share, about 20 percent above the stocks close on Wednesday. CA shares surged nearly 20 percent, while Broadcom’s stock dropped more than 12 percent. NBCUniversal-parent Comcast, meanwhile, increased its bid for British television group Sky to $34 billion, topping a $32.5 billion offer made by Twenty-First Century Fox. This could be the start of a record year for dealmaking, according to J.P. Morgan’s co-head of mergers and acquisitions Chris Ventresca. In an interview with CNBC, Ventresca said “With every day that goes by, they have a strengthening portfolio and balance sheet.” Asian stocks closed higher on Thursday, with markets shaking off some of the trade jitters seen overnight after the Trump administration announced a list of Chinese goods that may be subject to new tariffs. After the negative reaction in the last session to tariff announcements, China markets led the advance in the region. The Shanghai composite pared all of Wednesday's sharp losses, closing up 2.18 percent at 2,838.30 and the smaller Shenzhen composite climbed 2.74 percent to 1,597.17. The Nikkei 225 rose 1.17 percent, or 255.75 points, to close at 22,187.96, nearly reversing its declines from the previous session with some support coming from the weaker yen. In Seoul, the Kospi added 0.19 percent to finish the day at 2,285.06. Elsewhere, Hong Kong's Hang Seng Index edged up by 0.8 percent by 3:00 p.m. Oil prices rallied on Thursday, recouping some ground following sharp losses the previous session after Libya said it would resume oil exports. The rally received an extra boost from the International Energy Agency (IEA), which said the world's oil supply cushion "might be stretched to the limit" due to production losses. Benchmark Brent crude oil rose $1.08, or more 1.5 percent, to $74.48 a barrel by 8:51 a.m. ET (1251 GMT). On Wednesday, Brent slumped $5.46, or 6.9 percent. U.S. light crude gained 76 cents, or 1.1 percent, to $71.14 a barrel, after falling 5 percent the previous session. Gold prices edged up on Thursday, snapping two sessions of declines amid worries over the intensifying trade war between the United States and China. Spot gold was up 0.37 percent at $1,246.31 an ounce. In the previous session, it slipped 1 percent to hit its lowest in over a week at $1,240.89. U.S. gold futures for August delivery rose 0.18 percent to $1,246.70.