Trade-Talk Progress Lifts U.S. Stocks
December 12 2018 - 10:20AM
Dow Jones News
By David Hodari
U.S. stocks opened higher Wednesday, continuing a recent stretch
of volatility as signs of easing trade tensions boosted the outlook
for global economic growth.
The Dow Jones Industrial Average climbed 277 points, or 1.1%, to
24646, and the S&P 500 added 1.1%. The advance came after both
indexes fell for the fourth time in five sessions Tuesday. Both
gauges were down more than 9% from their all-time highs and off
1.4% for the year entering Wednesday.
The tech-heavy Nasdaq Composite rose 1.3%, on track for a third
consecutive advance.
Fears about slowing global growth as tariffs mount and interest
rates rise have buffeted stocks and commodities recently. Some
investors are anxious that weaker trade activity will exacerbate an
already-expected slowdown in the global economy if the U.S. and
China aren't able to resolve a monthslong tariff spat.
Incremental updates on the trade negotiations have swung risky
assets in both directions recently. China plans to replace an
industrial policy with a new program promising greater access for
foreign companies in a move to resolve trade tensions with the
U.S., The Wall Street Journal reported early Wednesday.
The news came after Beijing's top trade negotiator told U.S.
officials a day earlier that China was planning to reduce auto
tariffs and boost purchases of soybeans and other crops.
The warming in U.S.-China trade relations has prompted cautious
optimism among some investors, analysts said.
"A resolution on global trade is one of the most important
issues for markets going into 2019," said Viktor Hjort, global head
of credit strategy at BNP Paribas. "The positive angle is that U.S.
and Chinese negotiators appear to be making an effort, but I think
at this point, any absence of bad news is good news."
President Trump said in an interview with Reuters Tuesday that
he would intervene in the Justice Department's case against Huawei
Chief Financial Officer Meng Wanzhou if it would help smooth a
trade deal with China. Ms. Meng was granted bail by a Canadian
judge Tuesday. The tech executive's arrest last week stoked fears
of heightened tensions between the world's two largest
economies.
Uncertainty around trade will remain elevated, though, with
technological and intellectual property disputes between Washington
and Beijing unlikely to die down despite more conciliatory
rhetoric, said Ann-Katrin Petersen, investment strategist at
Allianz Global Investors.
Worries about trade policy have intensified in recent weeks as
fresh doubts about the path for interest rates in the U.S. have
also cropped up. While many analysts expect the Federal Reserve to
raise rates again next week, the central bank has hinted that it
might slow its pace of tightening next year if U.S. economic growth
slows more than expected.
Data Wednesday showed U.S. consumer prices were flat in
November, a sign a recent drop in oil prices is holding down
inflation. The report is the latest suggesting inflationary
pressures are waning, which could give central bankers more
latitude to move slowly with rate increases next year, analysts
said.
Analysts have said the economic impact of oil's recent slide is
murky because the U.S. is producing record amounts of crude,
meaning the sharp drop could affect business investment and
confidence even as gasoline prices fall. Oil prices climbed
Wednesday ahead of weekly inventory figures, boosting energy
stocks.
The yield on the benchmark 10-year U.S. Treasury note rose to
2.899%, according to Tradeweb, from 2.881%. Bond yields climb as
prices fall. The WSJ Dollar Index, which tracks the dollar against
a basket of 16 other currencies, fell 0.3%.
Elsewhere, European stocks climbed for the second straight
session as analysts largely shrugged off a leadership challenge
against U.K. Prime Minister Theresa May. The Stoxx Europe 600
climbed 1.5%, and the British pound trimmed some of its recent
drop.
Lawmakers in the U.K.'s ruling Conservative Party initiated a
no-confidence vote against Mrs. May. On Monday, she postponed a
parliamentary vote on her Brexit bill, which prompted a new volley
of criticism over her handling of the country's exit from the
European Union.
Wednesday's vote is the latest in a series of developments that
have prompted investors from outside the U.K. to limit their
exposure to Brexit uncertainty in recent months, said Emmanuel Cau,
head of European equity strategy at Barclays.
"Global investors have left the U.K. equities and FX markets and
not many people have the ability to trade on what's going to
happen," said Mr. Cau. "In this particular situation, nobody's been
able to make forecasts so they've stopped trying."
Rises in European stocks echoed gains in Asia, where the Nikkei
climbed 2.2% and Hong Kong's Hang Seng Index rose 1.6%. Benchmarks
in Taiwan, South Korea and Singapore all increased more than
1%.
-- Amrith Ramkumar contributed to this article.
Write to David Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
December 12, 2018 10:05 ET (15:05 GMT)
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