Stocks on Wall Street responded positively to the latest round in the tit-for-tat tariff trade war between the US and China.
President Donald Trump announced new tariffs on $US200 billion in Chinese goods but staggered their introduction to induce China back to the negotiations.
Initially, US stock futures and stocks in Asian markets tumbled on the news.
But investors “were expecting tariffs of 25% and instead only got ones of 10% for now, so the reaction is quite positive,” UBS Global Wealth Management equity strategist Claudia Panseri said.
It was interpreted as a sign that the Trump administration was still eager to reach a trade deal with China ahead of midterm elections in November.
Meanwhile, China responded with more tariffs on imports from the US, ranging from farm products and machinery to chemicals. These take effect on September 24, the same day the latest US tariffs. The Chinese rates will range from 5% to 10%.
Threat repeated
Mr Trump reiterated his threat to hit another $US267 billion of Chinese imports if Beijing retaliated. Combined with goods already hit with punitive levies, the total would exceed the $US505b in Chinese goods the US imported last year.
In a separate squeeze on China, the US Justice Department has ordered the government-run Xinhua News Agency and China Global Television Network – known as CGTN now and earlier as CCTV – to register as foreign agents.
Investors had sold stocks around the world on Monday in anticipation of the tariff announcement, sending the Shanghai Composite to its lowest level since November 2014.
In Asia, China-exposed indexes shrugged off early pressure. The Shanghai Composite Index added 1.8%, while Hong Kong’s Hang Seng closed 0.6% higher.
The Stoxx Europe 600 rose 0.1%. France’s CACX 40 gained 3% while Germany’s DAX and the UK’s FTSE 100 both rose 0.5%.
At the Wall Street close, the Dow Jones Industrial Average was up 184.84 points, or 0.7%, to 26,246.961. The S&P 500 rose 0.5% to 2904.31, while the Nasdaq Composite Index gained 0.7% to 7956.11.
Tech products excluded
The technology sector was one corner of the market where the tariffs were embraced as less drastic than feared.
The tech companies in the S&P 500 rebounded 0.6% after dropping 1.4% on Monday.
Importers in the US have in recent weeks sought to be spared from tariffs, with the Trump administration removing about 300 products initially included in the original tariff list released in early July.
Apple's smartwatches and Bluetooth devices were among the products to be exempted from the levies. Apple shares advanced just 0.2% after sliding 2.7% on Monday.
In corporate news, the US opened a criminal fraud investigation into Tesla and Elon Musk. Prosecutors requested documents related to Mr Musk’s claim that he had “funding secured” to take Tesla private.
That move, seen as an attack on Tesla short sellers, triggered wild gyrations in Tesla’s stock before Mr Musk abandoned the plan.
In commodities, US-traded crude oil gained 1.2% to $69.79 a barrel, and gold added 0.1% to $1,206.40 a troy ounce.
Oil prices rise
In commodities, oil prices were boosted by heightened geopolitical tension after Russia blamed Israel for the loss of one of its reconnaissance planes shot down by Syrian defence systems.
US crude for October delivery rose 1.4% to $US69.85 a barrel while Brent, the global benchmark, increased 1.3% to $US79.03.
The bond market selloff continued with the yield on the 10-year US Treasury note breaking clear of the 3% level that has for months acted as its ceiling.
It settled at 3.048%, its highest level since May 22, compared with 3.001% on Monday.
Tariff developments had little impact on currency trading. The yuan has fallen more than 5% against the US dollar so far this year, largely due to trade tensions and poor economic figures in China.
Meanwhile, the US dollar’s steady rise has stalled in recent weeks, with strategists suggesting that investors are becoming inured to the trade war.
Nevil Gibson
Wed, 19 Sep 2018
