Deal Day. Shares met on Friday when the US and China reached an agreement to stop the trade war for now, potentially paving the way for a broader deal in the future. The next customs round against China does not take effect, and the two countries expect to sign the agreement as soon as next month. Consumer sentiment returned unexpectedly in October, while oil prices rose following reported attacks on Iranian crude ships. In today's After the clock …
- looks at the latest US-China agreement;
- examines the growing optimism among consumers in October;
- wondering where crude oil prices may go in the months ahead.
Buy the rumor, buy the news
All three major indices were closed with solid gains, because a partial US-China trade agreement is finally underway. The
Dow Jones industrial average
increased by 319.92 points, or 1.21%, to finish at 26,816.59. The
added 32.14 points, or 1.09%, to finish at 2970.27, and
rose 106.26 points, or 1.34%, to close at 8057.04.
Shares opened higher Friday morning after President Donald Trump said in a tweet that "Good things are happening at the China Trade Talk Meeting" and the two countries are sharing " Warmer feelings than in recent times ."
Then, after meeting with China's leading trade negotiator Liu He at the Oval Office in the afternoon, Trump announced that the two countries have reached a "substantial phase-one deal," which allegedly dealt with intellectual property, financial services and China's acquisition of US Secretary of Agriculture
Treasury Secretary Steven Mnuchin also announced that the White House has scrapped a new round of Chinese import duties, which was scheduled to come into force on October 15.
It may take a few weeks to make the deal in writing President Trump and China's President Xi Jinping will likely sign the pact as soon as next month when they attend the APEC conference in Chile. A partial agreement could lay the groundwork for a more complete pact, or "phase two, "which could start almost immediately after that.
Still, with the positive expectations that are largely priced, the shares no longer increased on the news, and even slipped slightly towards the end of the day.
The University of Michigan's Consumer Sentiment Survey rose to a three-month high of 96 in October, well above the 93.2 reading in September and the economists' previous consensus. The reading reflects consumers' relieved concern for the trade war with China and little concern for President Trump's inquiry headlines.
Views on current health in the economy rose to the highest level since the end of 2018, but expectations for the next six months barely increased, reflecting concerns about slower economic growth going forward.
Consumers' expectations of income continued to rise to the highest level in two decades. This – together with the lower interest rate – is a positive sign of strong consumer spending, which may partly offset the weakness in business investment. Many Americans have already taken advantage of the lower prices to buy a home or new car.
Oil prices rose Friday after Iranian officials reported that a crude-carrying ship was attacked in the Red Sea near Saudi Arabia. It increased tensions in the region following the attack on Saudi Arabia's most important oil infrastructure last month. Concerns that unrest in the region could threaten global supply, Brent sent crude futures, the international benchmark index, 2.39% higher to settle at $ 60.51 a barrel, while West Texas Intermediate futures rose 2.15% to $ 54 , 70 per barrel.
Still as the global economy showed more weakness since late, softer demand was to offset some of the price increases driven by supply concerns. In its monthly report released today, the International Energy Agency cut its global oil demand forecast by 100,000 barrels per day to one million barrels per day in 2019, and 1.2 million barrels per day in 2020. Growth in 2019 is expected to be the weakest since 2016.
Write to Evie Liu at email@example.com