U.S. Markets React After Big Progress In Trump-Xi Relations

U.S. Markets React After Big Progress In Trump-Xi Relations

The future’s market has responded well to a tweet made by U.S. President Donald Trump say that the U.S.-China trade negotiations were ‘moving along very well’. There is hope that a comprehensive trade deal will be made between the world’s two biggest economies.

Since taking office, Trump has heavily criticised China for unfair trade practices including accusing China of stealing U.S. patents and for making U.S. manufacturing less competitive. As rhetoric between two countries has increased over the years, it led to tit-for-tat levying of trade tariffs.

The current negotiations were initiated at the G-20 summit in Argentina earlier this month. Now tempers seem to be cooling and markets responding.

Futures Trade

Futures have responded positively to Trump’s tweet, but also Chinese state media have responded well to current talks between Xi Jinping and Trump. March contracts on the S&P 500 Index rose by 0.8 percent at 10.20am in London and the Nasdaq 100 and Dow Jones Industrial Average Index both risen by 0.9 percent.

This is the first time all three indexes have had a weekly gain since November.

Trump’s update on trade talks caused crude oil prices to increase by 2 percent, which saw positive consequences for energy stocks after a bruising year. Energy companies including Exxon Mobil Corp and Chevron Corp saw a premarket rise. The industrial sector is sensitive to trade-related news, so Trump’s tweet saw a gain of 1.5 percent for Boeing Co and Caterpillar Inc.

Calming the Trade War

Trump and Xi agreed to a 90-day truce in Buenos Aires, but markets were still unsure about how talks would pan out. However, a U.S. trade delegation prepares to travel to Beijing to start talks beginning on 7th Jan, which has reassured U.S. stocks. Chinese factory gauge has slipped, the first time since 2016, and may push China for a deal.

Meanwhile, Trump has halted a scheduled increase in tariffs of US$200 billion in imports from China. At the moment there is optimism a deal will be reached.