By Chris Matthews, MarketWatch
China's exports, imports tumble as trade surplus widens
U.S. stocks traded mostly lower Monday morning as investors
reevaluate the"phase-one" trade deal between the U.S. and China,
announced in the final minutes of trade Friday, with growing
concern that the agreement will not lead to significantly lower
trade barriers or greater certainty over Sino-American trade
relations.
How are the major benchmarks faring?
The Dow Jones Industrial Average rose 2 points, or less than
0.1% to 26,818, while the S&P 500 index lost 4 points, or 0.1%,
to 2,967. The Nasdaq Composite index , meanwhile, fell 14 points,
or 0.2%, to 8,043.
On Friday, the Dow rose 319.92 points, or 1.2%, to 26,816.59,
the S&P 500 advanced 32.14 points, or 1.1%, to 2,970.27, while
Nasdaq gained 106.26 points, or 1.3%, to 8,057.04.
What's driving the market?
President Trump took to Twitter over the weekend to talk up the
first phase of a trade agreement with China, announced Friday
afternoon following two days of U.S.-China trade talks, which
culminated in a meeting between the president and Chinese Vice
Premier Liu He. Treasury Secretary Steve Mnuchin echoed this
optimism during an interview Monday.
As part of the deal, the U.S. postponed a planned tariff
increase on $250 billion in Chinese imports from 25% to 30%,
originally set to take effect Tuesday, in exchange for Chinese
promises to buy $40 to $50 billion in American agricultural
products annually though that would be double the $24 billion China
bought in 2017.
(https://www.reuters.com/article/us-usa-trade-china-agriculture/trumps-hailing-of-50-billion-in-chinese-farm-purchases-seen-as-meaningless-idUSKBN1WT0TG?il=0)
(https://twitter.com/realDonaldTrump/status/1183499482790612993)
But even this limited agreement has yet to be put into writing,
while thornier issues remain unresolved, including U.S. allegations
of intellectual property theft and unfair state subsidies of
Chinese businesses.
Meanwhile, the threat of higher tariffs still hang over the
global economy and financial markets, as a round of 15% tariffs on
about $160 billion in consumer goods is still set to be imposed on
Dec. 15th, underscoring the continued uncertainty that global
business leaders face as they attempt to measure consumer demand
and plan investment.
The Chinese aren't ready to sign off on the handshake agreement
made Friday, according to a report in Bloomberg
(https://www.bloomberg.com/news/articles/2019-10-14/china-wants-more-talks-before-signing-trump-s-phase-one-deal-k1q8bxgz),
which stated that Beijing wants to restart talks as soon as the end
of the month to nail down the final details, which may include a
demand to scrap the December tariffs.
A bigger trade deal will come over time in three stages,
(https://www.wsj.com/articles/china-emerges-with-wins-from-u-s-trade-truce-11570912439)
according to Trump, with more divisive issues to be addressed
later. These include Chinese practices that the U.S. alleges but
Beijing denies, such as forced transfers of U.S. technology to its
economic rival.
"On the one hand, this 'mini' deal is an encouraging sign, as it
reduces the risk that the trade battle escalates into a full-scale
cold war," wrote Marios Hadjikyriacos, investment analyst at XM, in
a Monday note.
"However, it doesn't bring the two sides any closer to a 'big'
deal -- perhaps even the opposite," he added. "By striking this
truce, Trump has effectively alleviated much of the pressure on
Beijing, meaning that the Chinese leadership won't be in a rush to
make any concessions on the real issues anytime soon."
Potentially boosting sentiment, however, was a tweet by Global
Times editor Hu Xijin, who called last week's talk a
"breakthrough." Hu's Twitter feed is followed closely by financial
markets due to his perceived links with Chinese authorities.
(https://twitter.com/HuXijin_GT/status/1183736136276951041)
Economic data from China Monday showed the world's
second-largest economy is feeling the effects of the trade war,
with exports falling 3.2% in September, and exports to the U.S.
falling by 22%. Along with the 11th straight decrease in imports
from the U.S., the bilateral trade surplus contracted for the first
time since February. Overall though China's trade surplus globally
rose to $39.65 billion in September, from August's $34.8 billion,
as imports fell faster than exports.
Investors were also eyeing developments in negotiations over
Britain's exit from the European Union, after optimism that a deal
could be reached rose Friday following productive negotiations
(http://www.marketwatch.com/story/brexit-hopes-fuel-fresh-rally-for-the-british-pound-2019-10-11)
between U.K. Prime Minister Boris Johnson and Irish Prime Minister
Leo Varadkar on the difficult question of the customs border
between Britain's Northern Ireland and the Republic of Ireland.
The British pound , however, retreated Monday
(http://www.marketwatch.com/story/pound-pulls-back-from-three-month-highs-as-hopes-dim-over-brexit-agreement-2019-10-14),
after the European Commission said late Sunday that "a lot of work
remains to be done" to finalize Brexit, while questions remain as
to whether British Parliament will accept a deal negotiated by
Johnson.
Trading volumes may be lower Monday due to the U.S. Columbus Day
holiday which closes federal government offices and the U.S.
Treasury bond market but leaves the stock and commodities markets
open.
Which stocks are in focus?
Shares of Dow component Boeing Co. (BA) rose after the company's
board said late Friday that it voted to separate the roles of chief
executive and chairman as the company has struggled to deal with
issues related to the groundings of its 737 Max jet.
The aviation company said Dennis Muilenburg will continue as
CEO, president and a board member, while David Calhoun, the current
independent lead director, will become non-executive chairman.
Fellow Dow constituent Nike Inc.'s (NKE) stock was on the rise,
up 1% after it was upgraded to neutral
(http://www.marketwatch.com/story/nike-sportswear-jordan-brand-drive-upgrade-at-bank-of-america-2019-10-14)
from underperform by Bank of America Merrill Lynch, based on a
bullish outlook for the company's sportswear business.
Shares of Fastenal Co. (FAST) were under pressure Monday after
the stock was downgraded to "market perform" from a "strong buy" by
Raymond James. The stock rallied 17.2% Friday
(http://www.marketwatch.com/story/fastenals-stock-rockets-toward-best-day-in-19-years-after-earnings-beat-2019-10-11)
after the company reported better than expected earnings for the
quarter ended Sept. 30.
Sempra Energy(SRE) announced Monday that it would sell its
equity stakes in its Chilean businesses for $2.23 billion in cash
to State Grid International Development. Shares were unchanged in
premarket trade.
Parsely Energy Inc. (PE) shares declined after it
(http://www.marketwatch.com/story/parsley-energy-to-buy-jagged-peak-in-an-all-stock-deal-valued-at-23-billion-including-debt-2019-10-14)(PE)announced
(http://www.marketwatch.com/story/parsley-energy-to-buy-jagged-peak-in-an-all-stock-deal-valued-at-23-billion-including-debt-2019-10-14)
the acquisition of Jagged Peak Energy Inc. (JAG) in an all-stock
transaction.
Shares of Aecom(ACM) rallied Monday after the infrastructure
company said its selling it's management services business
(http://www.marketwatch.com/story/aecom-shares-jump-premarket-on-news-to-sell-management-services-business-for-2405-billion-2019-10-14)
to American Securities LLC and Lindsay Goldberg for $2.405
billion.
How are other markets trading?
In commodities, crude oil prices fell about $1.46 to $53.25 on
the New York Mercantile Exchange. Gold futures rose $5.80 to
$1494.60 an ounce. The U.S. dollar , meanwhile, edged 0.2% higher
against a basket of its peers.
In Asia overnight
(http://www.marketwatch.com/story/asian-markets-rise-on-relief-over-partial-us-china-trade-deal-2019-10-13),
the China CSI 300 rose 1.1%, while Hong Kong's Hang Seng index
added 0.8%. Markets in Japan were closed for a holiday. In Europe,
shares were mostly lower
(http://www.marketwatch.com/story/european-stocks-slink-back-on-warier-view-of-us-china-brexit-talks-2019-10-14),
as evidenced by the 0.5% decline in the Stoxx Europe 600 index
.
(END) Dow Jones Newswires
October 14, 2019 10:40 ET (14:40 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.