The Dow Jones is expected to record another strong performance until the month’s end following the U.S. government’s decision to delay the deadline of trade talks with China. Previous reports suggested that the U.S. President Donald Trump is considering a 60-day extension of the March…
The Dow Jones is expected to record another strong performance until the month’s end following the U.S. government’s decision to delay the deadline of trade talks with China.
Previous reports suggested that the U.S. President Donald Trump is considering a 60-day extension of the March 1 deadline, suspending tariffs on key sectors for an additional two months.
If the extension is to materialize in the days to come, strategists expect the Dow Jones and the rest of the U.S. stock market to continue their rallies, maintaining their momentum.
Since January 28, within less than one month, the Dow Jones has recovered from 24,528 points to 26,031 points, by more than 6 percent.
As Bank of America Merrill Lynch top strategist, Savita Subramanian said, the U.S. market has been growing steadily in the past month fueled by the optimistic prospect on a comprehensive trade deal.
The strategist emphasized that while a partial deal could be priced into the market, a full trade agreement between the U.S. and China could lead to a massive increase in the momentum of the market.
“If we get the real deal, this is where you roll back the tariffs from 2018 which I don’t think is priced into the market, that would add at least 1 or 2 percentage points of earnings growth to 2019 that’s not in the numbers,” Subramanian said.
The sentiment towards a full trade deal has improved in recent weeks because investors believe that the U.S. would have established a deal with the Chinese negotiators already if the intent is to establish a partial or an incomplete deal.
President Trump said on February 25 that the U.S. government has made substantial progress in achieving a trade deal with China and that the tariffs will be delayed to make additional progress in the near-term.
The President stated:
I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.
As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!
Xinhua, the official state-run press agency of the People’s Republic of China, echoed the sentiment of President Trump.
In a report, Xinhua noted that the extension of tariffs demonstrates the “sincerity, emphasis and a sense of urgency” to reach a trade deal in the short-term.
People’s Daily, the biggest newspaper in China, similarly reported that the extension of tariffs has “sent positive messages to the world” on the progress of the trade talks, which would allow both countries to establish a much-needed foundation to establish a full accord.
“The outcome has sent positive messages to the world that China and the United States are able to properly solve trade disputes, laying the foundation for the two sides to reach a final agreement,” the report of People’s Daily read.
Since the release of the reports of Xinhua and People’s Daily, the SSE Composite Index, which tracks all stocks listed on the Shanghai Stock Exchange, has surged by 5.6 percent in one of the biggest single-day spikes in the past 12 months.
In the near-term, markets analysts foresee both China and the U.S. extending strong upside movements in their respective stock markets.