U.S. Stocks Shrug Off New Tariffs to Post Gains
September 18 2018 - 6:35PM
Dow Jones News
By David Hodari
U.S. stocks rose as investors viewed a fresh round of tariffs on
Chinese goods, as well as China's early response, as more measured
than expected.
Because the introduction of the latest tariffs will be
staggered, there is cautious optimism there is time for
negotiations between the countries, some traders said.
The Dow Jones Industrial Average gained 184.84 points, or 0.7%,
to 26246.96 and the S&P 500 rose 15.51 points, or 0.5%, to
2904.31, while the Nasdaq Composite gained 60.32, or 0.8%, to
7956.11.
Investors sold stocks around the world Monday in anticipation of
the Trump administration's announcement and sent the Shanghai
Composite to its lowest level since November 2014.
"Whenever there are tariff threat rumors, the market's knee-jerk
reaction is to sell off," said Mohit Bajaj, director of ETF trading
solutions at WallachBeth Capital. "But then when we realized it's
smaller, we bounce back."
President Trump late Monday announced new tariffs on $200
billion in Chinese goods. The White House said the 10% tax is set
to be next Monday on a range of Chinese imports, including luggage
and seafood. That levy will rise to 25% at the end of 2018. In
response, China's commerce ministry said it "has no choice but to
undertake synchronous retaliation" to defend its interests and
unveiled plans for tariffs on an additional $60 billion of U.S.
goods.
The fresh round of tariffs marked an escalation of the
continuing trade spat that has dogged relations between the world's
two largest economies. But investors "were expecting tariffs of 25%
and instead only got ones of 10% for now, so the reaction is quite
positive," said Claudia Panseri, European equity strategist at UBS
Global Wealth Management.
The technology sector was one corner of the market where the
tariffs were embraced as less drastic than feared. The sector
rebounded Tuesday, rising 0.6% in the S&P 500 after dropping
1.4% a day earlier. Importers have in recent weeks sought to be
spared from tariffs, with the Trump administration removing about
300 products initially included in the original tariff list
released in early July. Smartwatches -- after a direct request from
Apple -- and Bluetooth devices were among the products to be
exempted from the levies.
Also helping the bounce from Monday's declines were market
expectations that negotiations between Washington and Beijing,
currently being planned for the coming weeks, will proceed as
expected.
Some traders were interpreting the staggered introduction of the
tariffs as a sign the Trump administration is still eager to reach
a trade deal with China ahead of midterm elections in November,
according to Stewart Cook, head of London sales trading at
Berenberg.
The Stoxx Europe 600 rose 0.1% after China-exposed indexes
shrugged off early pressure in Asia-Pacific trading. The Shanghai
Composite Index added 1.8%, while Hong Kong's Hang Seng closed 0.6%
higher.
The impact of the new tariffs on foreign-exchange trading was
limited, with the Chinese yuan 0.1% lower against the dollar. The
WSJ Dollar Index, which measures the U.S. currency against a basket
of 16 others, rose 0.1%.
China's currency has fallen more than 5% against the dollar this
year, with analysts pointing to trade tensions as a major factor
behind increasingly torpid economic figures out of Beijing.
Meanwhile, the dollar's steady rise has stalled in recent weeks,
with strategists suggesting that investors are becoming inured to
the trade fight.
The dollar "won't price the same thing over and over again. Part
of the recent slowing is that the Chinese were letting the yuan
weaken, but since they effectively called a halt to weakening in
the currency, we've seen things calm down," said Kit Juckes, chief
foreign-exchange strategist at Société Générale.
-- Corrie Driebusch
contributed to this article
Write to David Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
September 18, 2018 18:20 ET (22:20 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.