Thursday November 7th

7-11-2019

Dow futures jump 100 points after China says it has agreed with the US to roll back tariffs

U.S. stock index futures turned sharply higher Thursday after China said the world’s two largest economies had agreed to remove existing trade tariffs. Around 7 a.m. ET, Dow Jones Industrial Average futures were up 135 points, implying an opening gain of 118 points. S&P 500 and Nasdaq 100 futures also pointed to solid gains. The gains put the Dow and S&P 500 on track to reach fresh record highs at the open. Trade bellwethers Caterpillar and Boeing were both up at least 0.7% in the premarket. Chip stocks such as Micron Technology, Advanced Micro Devices and Skyworks Solutions all gained at least 1% before the bell. Apple shares advanced 0.8%. Gao Feng, a ministry spokesperson for China’s Commerce Ministry, said that both sides had agreed to simultaneously cancel some existing tariffs on one another’s goods, according to the country’s state broadcaster. The ministry spokesperson said that both sides were closer to a so-called “phase one” trade agreement following constructive negotiations over the past two weeks. One important condition for a limited trade agreement, Feng insisted, was that the U.S. and China must remove the same amount of charges at the same time. It comes after reports that a meeting between President Donald Trump and Chinese President Xi Jinping could be postponed until December — delaying a chance for the two leaders to sign an interim trade deal. “The last 24 hours have seen a bit of whiplash in the U.S./China trade drama, as a potentially negative headline yesterday has been more than offset by a positive one this morning,” said Tom Essaye, founder of The Sevens Report, in a note to clients. But “it’s fair to say that at these levels, the market is already partially pricing in removal of the tariffs that were implemented on September 1.” “That also means the risk is of disappointment is now real on an actual phase-one announcement, because if all we get is “what’s expected” and we don’t see any existing tariff removal, we could easily see a sell-the-news reaction in stocks,” Essaye said.  Market participants had expected the two economic giants to sign a deal later this month, after both Washington and Beijing spoke of progress in talks late last week. The U.S. and China have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment. On the data front, the latest weekly jobless claims numbers will be released at around 8:30 a.m. ET, and consumer credit figures for September are due to be published later in the session. In corporate news, Booking Holdings, Disney and Activision Holdings are the companies set to report their latest quarterly figures after market close. Qualcomm shares jumped more than 6% in the premarket after reporting Wednesday quarterly results that topped analyst expectations. The company’s results were driven by strength in Qualcomm’s licensing business. Shares in Asia Pacific were mixed on Thursday amid reports of a potential delay in the signing of a U.S.-China trade deal. Mainland Chinese stocks edged higher on the day, with the Shenzhen component advancing 0.57% to 9,917.49 and the Shenzhen composite gaining 0.643% to approximately 1,651.77. The Shanghai composite was largely flat at about 2,978.71. Hong Kong’s Hang Seng index slipped 0.18%. In Japan, the Nikkei 225 closed 0.11% higher at 23,330.32 while the Topix index added 0.22% to finish its trading day at 1,698.13. South Korea’s Kospi ended its trading day largely flat at 2,144.29. Brent crude rose above $62 a barrel on Thursday after China hinted at progress towards a trade deal with the United States, raising hopes for an end to a long dispute that has weighed on economic growth and fuel demand. China and the United States have agreed in the past two weeks to cancel tariffs in different phases, the Chinese commerce ministry said on Thursday without giving a timeline. The trade dispute has prompted analysts to lower forecasts for oil demand and raised concerns that a supply glut could develop in 2020. Oil fell on Wednesday, partly because of worries that a U.S.-China trade deal might be delayed. “Today we start with a different set of headlines that they came to some agreement on the framework,” said Olivier Jakob, oil analyst at Petromatrix. “That is definitely what is supporting prices.” Brent crude, the global benchmark, rose 71 cents to $62.45 after settling down $1.22 on Wednesday. West Texas Intermediate crude climbed 72 cents to $57.08. Gold fell on Thursday, losing some of its safe-haven appeal as signs of progress in the U.S.-China trade negotiations rekindled a rally in stock markets. Spot gold was down 0.5% at $1,483.07 per ounce at, while U.S. gold futures were down 0.6% at $1,484.20.