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Dow Futures Blow Past 27,000 as China Touts “Constructive” Trade Talks With U.S.

Last Updated September 23, 2020 1:02 PM
Sam Bourgi
Last Updated September 23, 2020 1:02 PM

Futures on the Dow and broader U.S. stock market rose sharply ahead of Monday’s open, as investors rallied behind apparent progress in trade talks between America and China.

Dow Futures Rally; S&P 500 Follows

Futures on all three major U.S. indexes rose in after-hours trading. Dow Jones Industrial Average (DJIA) futures gained as much 151 points, or 0.5%, to reach 27,045.00.

DJIA Futures Contract
Dow Jones futures cross 27,000 in early Asian trading. | Chart: Bloomberg Markets

S&P 500 futures contracts climbed 0.4% to 3,000.75. The Nasdaq 100 futures contract rose 0.5% to 7,867.25.

Chinese stocks traded sharply lower at the start of Monday’s session, with the CSI 300 Index falling 1.1%. Australia’s benchmark ASX 200 Index gained 0.3%.

U.S., China Held “Constructive” Trade Talks

U.S. equities declined last week amid reports that China’s top trade negotiators had cancelled a ‘goodwill’ trip to U.S. farmers in Montana, raising fears that the talks between the two countries had grown cold.

On Monday, trade-deal hopes blossomed again after China’s commerce ministry said delegations from both countries held “constructive ” talks in Washington last week. China also said that its withdrawal from a planned visit to U.S. farmlands had nothing to do with ongoing trade talks.

Negotiations are set to continue through early October, with the Trump administration confirming that it was not interested in a partial trade deal that would delay the implementation of new tariffs on Chinese goods. Representatives from both countries have already developed  a framework for future negotiations, raising stakes on the October summit.

At this stage, a comprehensive trade deal seems highly unlikely given the myriad of issues holding up the negotiations. Chief among them are Chinese industrial policy, intellectual property and Beijing’s massive surplus with the U.S.

An extended trade war is unlikely to benefit China nor the U.S., according to ING. Although Washington is set to reduce its trade deficit with China, U.S. companies are still importing goods from other parts of the world.

On Friday, ING economists James Knightley and Iris Pang wrote :

“The U.S. is on track to experience its smallest goods trade balance with China since 2012. However, the U.S. goods deficit overall is not narrowing to anywhere near the same extent.”