Markets have muted reaction to long-awaited China trade deal

Picture for representational purpose.

Picture for representational purpose.   | Photo Credit: AP

Media reports a day earlier that a deal was close sent the S&P 500 and the Nasdaq to record highs while technology companies, that rely heavily on China for sales, led the way higher.

After months of waiting, markets had a muted reaction to news Friday that the US and China had reached an initial deal on trade.

The agreement to a “Phase 1” deal means that the US won’t impose new tariffs on Chinese goods that had been set to kick in this weekend. President Donald Trump and China made separate statements confirming the agreement. Technology companies, which rely heavily on China for sales as well as parts, rose.

Media reports a day earlier that a deal was close sent the S&P 500 and the Nasdaq to record highs. Technology companies led the way higher. Those companies rely heavily on China for sales as well as parts and have much to gain from a resolution of the long running dispute. Apple climbed 1.2%. Banks and communications companies fell.

Keeping score

The S&P 500 index was little changed as of 12-30 p.m. Eastern time. The Dow Jones Industrial Average was also little changed at 28,136. The Nasdaq rose 0.2%. The Russell 2000 index of smaller company stocks fell 0.5%. The yield on the 10-year Treasury fell to 1.82% from 1.90% late Thursday.

Analyst's Take

The latest development in trade relations didn’t have much of an impact on the market because it is essentially just a tariff truce, according to Jamie Cox, managing partner for Harris Financial Group. The next phase of the agreement will have to tackle some of the larger issues to actually provide relief from existing tariffs. "It’s going to be a bigger lift in large part because the president doesn’t really want to take the tariffs off,” Cox said. “That’s going to require much more give on the Chinese part than what is currently in the offer.”

Brexit bump

 British stocks and the British pound moved sharply higher after a resounding victory for the Conservative Party eased uncertainty over the nation’s upcoming exit from the European Union. The benchmark FTSE 100 rallied 1.4% and the pound jumped to $1.3326 from $1.3150 late Thursday. Other European markets also rose. Asian markets rose sharply.

Status dislike

Facebook fell 1% amid reports that the Federal Trade Commission could block the company from integrating its messaging apps. The social media platform has been planning to integrate its messaging apps, including Messenger and What’sApp, since early 2019. Federal regulators are concerned that the plan could make it hard to break up the company should the FTC find that necessary.

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Printable version | Feb 21, 2020 9:33:01 PM |

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