According to a news report by Bloomberg, the stock market soared after the United States and China announced a cease-fire in the ongoing trade war. Treasuries as well as the dollar fell while the price of crude oil shot up by 5% on optimism that the oil producing countries were going to go ahead with the expected production cuts.
The Dow Jones Industrial Average, the Nasdaq Composite Index and the S&P 500 Index were off their season’s highs, and European and Asian stocks gained on the news that the US and China were going to postpone new tariffs and focus on trade discussions.
Stocks went up after US President Donald Trump stated that China was going to reduce as well as remove some tariffs on American cars being imported into the country. He also promised to hold off on any new tariffs on Chinese goods being imported into the country for the next three months.
Columbia Threadneedle Investments’ portfolio manager Matthew Litfin stated that this truce about trade between the two countries was good for US stocks since it – at least temporarily – removed some of the worst-case tariff possibilities.
Litfin, however, was cautionary, stating that three months was not a long enough time for serious trade negotiations. Additionally, global economic growth looked to be slowing down. Therefore, he said, he wasn’t expecting the euphoria from these talks to last long.
The price of oil shot up after news came of efforts from different parts of the globe to cut down on oil production. Saudi Arabia and Russia, in a separate meeting during the G20 Summit this weekend, extended their pact to continue managing global oil markets into 2019.
Canada’s largest oil producing province Alberta announced unprecedented oil curbs on production that would be in effect from January. This pushed the price of oil even further up.
However, there was little dent in the market optimism after Qatar made a surprise announcement that it would be leaving the OPEC, just as the group was set to meet in Vienna later this week.
The main headliner from the G20 Summit side meetings was the truce between Trump and Xi Jinping, which is done a lot to calm investor concerns about the state of global economic growth after a rocky period for risk assets in the last few months.
The US had planned to push ahead with another round of tariffs on $200 billion worth of imported Chinese goods from January 1 next year. However, after the talks between the two countries’ leaders, Trump has postponed the imposition of those tariffs by three months.
Investors are now assessing the prospect of an end-of-the-year stocks rally. Oil traders, on the other hand, are focused on the upcoming meeting between the OPEC members and their allies, which will likely see a scaling down in the production of oil globally.
Schwab Center for Financial Research’s chief global investment strategist Jeff Kleintop stated that at this time, it was easy to see the cessation of trade hostilities between the US and China as “glass half empty” since it was actually just a postponement and that talks about working together were just a promise. There has been no resolution to this trade war yet, he said.
In stocks, the S&P 500 Index went up by 0.7% in trading today, the Dow Jones Industrial Average saw a hike of 0.8% and the Nasdaq Composite Index has gone up by 1.1% so far today.
The STOXX Europe 600 went up by 1.3%, the UK’s FTSE 100 rose 1.1%, the German DAX Index gained 1.8%, the MSCI Emerging Markets Index shot up 2.3% and the MSCI Asia Pacific Index gained 2%.