Stocks Open Higher as U.S.-China Talks Commence -- 2nd Update
December 11 2018 - 11:20AM
Dow Jones News
By David Hodari and Akane Otani
U.S. stocks jumped Tuesday as investors weighed signs of
progress in trade talks between Washington and Beijing.
The Dow Jones Industrial Average climbed 186 points, or 0.8%, to
24607. The S&P 500 rose 1% and the Nasdaq Composite added
1.1%.
U.S. stocks have been under pressure for much of the fourth
quarter as investors have worried about the fate of the U.S. and
China's trade negotiations, which appeared to be deteriorating
weeks ago.
But recent indications that Chinese officials could be open to
amending a policy aimed at boosting firms' dominance in artificial
intelligence and robotics--a key area of contention for the
U.S.--helped boost optimism among investors. Stock futures also
rallied earlier in the day after President Trump said on Twitter
that "very productive conversations" were happening.
Companies that have become barometers for investors' sentiment
around trade talks rallied, with Caterpillar and Deere adding more
than 1% apiece.
Auto stocks also pushed higher, helped by reports that China's
cabinet was considering proposals to cut tariffs on U.S.-made cars.
Ford shares rose 1.7%, while General Motors advanced 3.3%.
Still, signs of caution remained. Apple shares missed out on the
broader rally, trading around the flatline as the company tried to
get a Chinese court to reconsider its decision to ban sales of
older iPhones in China.
The court ruling added another source of friction in the trade
skirmish between the world's two largest economies, as did the
recent arrest in Canada of Huawei Technologies Co. Chief Financial
Officer Meng Wanzhou on behalf of U.S. authorities. Ms. Meng is
accused of lying to banks about Huawei's ties to a company that
violated U.S. sanctions on Iranian business.
Between lingering trade tensions and signs of slowing growth
around the world, many investors say they are heading into 2019
with muted expectations. BlackRock cautioned in its annual
investment outlook that negative returns across both stocks and
bonds--a relatively rare phenomenon--could become more common as
the bull market ages.
Elsewhere, the Stoxx Europe 600 rose 2.1%, reversing course
after U.K. Prime Minister Theresa May's postponement of a crucial
Brexit vote in parliament Monday sent shares sliding. Ms. May's
shock decision to pull the vote further diminished many investors'
willingness to bet on U.K. assets, some said.
"If you're a macro investor, you're going to get blown out of
the water by events like yesterday's," said John Wraith, head of
U.K. rates strategy at UBS. "It makes investors incapable of
trading those markets with any conviction whatsoever, so you see a
lot of fund managers staying neutral and keeping their exposure to
a minimum."
Shares in Asia were mixed, with India's Nifty 50 index slumping
1.9% after the governor of its central bank unexpectedly resigned
from his post.
Central banking policy was also a subject of focus in the U.S.,
where data showed producer prices--another gauge of
inflation--rising for the third consecutive month.
Investors and analysts widely expect the Federal Reserve to
raise short-term interest rates when it meets next week, with CME
Group data suggesting the market is pricing in a 78% probability of
a rate hike.
Any forward guidance out of the Fed will be closely scrutinized,
especially since some investors believe Chairman Jerome Powell has
conveyed mixed messages over recent months. Mr. Powell jolted
markets after suggesting rates weren't close to neutral and then
subsequently appearing to backtrack on those remarks.
"I think he got a bit ahead of himself saying that we're not
close to neutral," said Mark Heppenstall, chief investment officer
at Penn Mutual Asset Management. "I think that was language we
weren't prepared for and it helped tip the market. Now I think
you'll see his language more focused on gradual patience."
Write to David Hodari at David.Hodari@dowjones.com and Akane
Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
December 11, 2018 11:05 ET (16:05 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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