Following a protracted session of posturing and taunts, the ‘phase one’ of the US-China trade deal was signed on Wednesday. This was met with a measured reaction from most, except the Dow Jones, which hit 29,000 points for the first time in its history.
Despite the giddiness of this news having already been priced into global equities, and the substance of the deal being largely cosmetic, the Dow Jones is expected to beat yesterday’s highs and peak out around 29,100.
The bullish predictions should be somewhat tempered, though, when we remember the difficulties in reaching this largely symbolic checkpoint, and we imagine the challenge of more substantive progress during phase two.
Giving his view on market movements this morning, Spreadex Financial Analyst Connor Campbell commented,
“Though analysts failed to muster too much enthusiasm for the signing of the US-China trade deal – instead focusing on the multitude of issues not covered by the agreement – the Dow Jones nevertheless struck a fresh record high in its aftermath.”
“Crossing 29000 once again, the Dow is actually set to push past 29100 for the first time in its history later this Thursday. This despite a persistent sense of dissatisfaction surrounding what the ‘phase one’ deal failed to achievement, and the difficulties of facing the superpowers ‘phase two’ – if there is even the appetite from Washington and Beijing to begin another set of negotiations.”
“With the Dow setting the tone last night, the European indices chose to indulge in a bit of positivity. The DAX once again neared 13500 as it jumped half a percent, while the CAC climbed to 6060 as it rose by the same amount.”
“Lagging behind was the FTSE, which at best added 0.1%; enough to send it to a 3-week high of 7650, but still a disappointment.”
“There were a few things pinning the UK index back. Firstly, the pound rebounded after what has been a week of bad data and rate cut chatter, rising 0.3% against the dollar and 0.2% against the euro.”
“Then there was another wave of weak post-Xmas earnings for the FTSE to swallow. Pearson (LON:PSON) fell 11% following its latest update, investors troubled by both 2019’s operating profit being at the bottom of the firm’s guidance, and the prospect of a further £10 million to £80 million decline in 2020.”
“Whitbread (LON:WTB), meanwhile, tumbled 4.7% as a 1.3% drop in third quarter like-for-like sales drew focus from a 1% rise in total sales growth, alongside a London-driven 0.3% increase in UK business.”
“Providing something of a buffer for the FTSE was Associated British Foods (LON:ABF), which climbed 2.8%. This as like-for-like growth at Primark took the heat off a dip in operating profit margins, while AB Sugar and AB Agri saw 5% and 10% sales growth respectively.”