Trade Talks: Renewed Optimism Helps Stock Market Rise

The US (SPY) stock index futures rose on Monday. President Trump signaled optimism about a trade deal with China (MCHI) (FXI), according to Bloomberg.

US stock markets to open higher

The Dow Jones Industrial Average futures rose by more than 220 points as of 9:16 AM ET on Monday. The S&P 500 and the Nasdaq 100 futures also gained. The increase signaled a positive market opening on Monday for both indexes. The Stoxx Europe 600 Index rose after President Trump’s comments about the possibility of a trade deal with China.

President Trump stated at the G7 meetings in France that China asked to renew the trade talks on August 25. According to Bloomberg, President Trump said that China had called “our trade people and said, let’s get back to the table.” Trump had a meeting with German Chancellor Angela Merkel on Monday. He stated that “we’re having very meaningful talks, much more meaningful than I would say at any time frankly.” Trump also said that “we’re in a stronger position now to do a deal, a fair deal for everyone.”

US stocks rose due to optimism about the trade deal. Apple, which is highly sensitive to trade war issues, rose 1.6% in pre-market trading on Monday. Caterpillar (CAT), which fell 3.3% on August 23, has risen 1.2% in pre-market trading. Semiconductor stocks, which also have a huge revenue exposure in China, have risen in pre-market trading. Micron (MU), Advanced Micro Devices (AMD), NVIDIA (NVDA), Broadcom (AVGO), and Qualcomm (QCOM) gained 1.6%, 2.64%, 1.55%, 1.51%, 1.97%, respectively, in pre-market trading.

Trade talks restarted after massive sell-off

The talks restarted after China’s top trade negotiator, Vice Premier Liu He, publicly called to de-escalate the tensions on Monday. Liu said that he’s against the trade war. The issues aren’t favorable for the US or Chinese economy. Notably, the trade war escalated on August 23 after China imposed new tariffs on US goods worth $75 billion. The Dow Jones Industrial Average fell by around 623 points or 2.37% on August 23 due to China’s tariffs. The S&P 500 and the Nasdaq Composite fell 2.59% and 3.00%, respectively.

In retaliation, President Trump announced that he would raise the current tariffs from 25% to 30% on imported Chinese goods worth $250 billion starting in October. He also raised the planned tariffs of an additional 10% to 15% on $300 billion Chinese goods. The 15% tariffs would be imposed in September instead of December.

President Trump ordered that US firms stop any trade with Beijing. He wants companies to start looking for an alternative to China. On August 25, President Trump said that he could declare a national emergency.

The tariffs increased investors’ fears about a global economic recession. President Trump’s comments seem to have raised hopes of easing pressure. A truce could benefit the US and China.