US/Sino Trade Deal Takes Shape, EU Up Despite Brexit Woe, Industrials Lead U.S. Market Higher

A trade deal between the U.S. and China is starting to take shape but the details are still sketchy, and the global equity market doesn’t care.
Thomas Hughes

Trade Hopes Lift China To New High

The Shanghai Composite led Asian markets higher on Monday following a report from the Wall Street Journal. The report states U.S. and Chinese negotiators are moving closer to completing a deal. The story alleges the two sides are in the final stages although there is little detail as yet. What we do know is that China has offered to lower tariffs on a wide range of U.S. products from chemicals to autos while on the U.S. side it is possible we’ll most or all sanctions and tariffs imposed in the last year reduced or removed.

The Shanghai Composite moved above the 3,000 for the first time in over 8 months as it extends it march into bull-market territory. The Japanese Nikkei posted the second strongest gain, 1.02%, followed by a 0.52% advance in the Hong Kong Hang Seng. Shares of ZTE, key to the international trade debate, advanced nearly 2.0%. The Australian ASX posted a gain of 0.40%, led by the miners and materials sectors, while the Korean Kospi posted the only loss at -0.22%.

Trade Hope Lifts EU Market, Brexit Still A Worry

Trade hopes helped lift the EU indices in early Monday trading. The UK FTSE leading with a gain near 0.75%, the UK-centric index was supported by domestic news as well. On the Brexit front, the Irish PM has gone on the record suggesting an extension to Article 51 is probable. If passed, the extension would likely push out the date for Brexit to June. Theresa May, in other Brexit-related news, has initiated a $1.29 billion fund to aid less-prosperous UK towns in the post-Brexit period.

The French CAC was posting the second strongest move at midday, about 0.70%, with the DAX trailing at only 0.25%. In stock news, shares of UK tabloid Daily Mail moved up more than 4.0% because the company announced a plan to return $1.29 billion to shareholders. Shares of Rotork, also UK-based, fell more than -3.0% after it reported earnings and revenue below expectations.

Industrials Lead U.S. Markets Higher

While the trade-news is good, there are still some concerns lingering in the market. Details for the deal remain sketchy and there is little hope of significant headway on the core issues. The industrial sector helped push the U.S. equity indices higher in early Monday trading. The Dow Jones Industrial Average indicated up about 0.35% in the pre-market session. The move was in turn led by shares of industrial giants Caterpillar, Boeing, and Deere which all have extensive exposure to China.

Regarding the indices, the tech-heavy NASDAQ was in the lead with a gain near 0.55% followed by a 0.35% advance in the broad-market S&P 500. This week will be dominated by trade negotiations but traders should not discount the data. This week is full of key economic data from the U.S. including the all-important Non-Farm-Payrolls on Friday. The consensus is for job gains in the range of 190,000; so long as the twelve-month average remains above 200,000 the market should remain strong.

The more important data, found within the NFP, will be average hourly wages. Wages have been growing near 3.0% for some time and accelerating. The gains are underpinning strength in the consumer that is in turn supporting the U.S. consumer-based economy.

 

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