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Dow Jones Jumps Toward Record as US-China Trade Tensions Thaw

Dow Jones Jumps Toward Record as US-China Trade Tensions Thaw

2019-09-12 15:36:00
Rich Dvorak, Analyst
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DJIA – DOW JONES INDEX INCHES TOWARD ALL TIME HIGH ON US-CHINA TRADE WAR LATEST:

  • The Dow Jones Industrial Average (DJIA) continues to creep higher as the stock market index gains ground following positive US-China trade war headlines
  • US-China trade relations are showing signs of improvement amid “gestures of good will” from both parties
  • Check out our free educational guide on Breaking News Trading Strategies

Equity investors have digested a wealth of information on the trade dispute between the US and China over the last few trading sessions. In a continuation of US-China trade war optimism sparked earlier this month, which has largely driven the recent ascent in the Dow Jones and other risk assets, reports are coming out that Sino-American trade relations are de-escalating further ahead of scheduled trade talks.

In an effort to thaw tensions and break the ongoing impasse, China is considering the exclusion of national security issues from trade negotiations and ramping up agricultural purchases from US farmers. Also, Trump announced his decision to delay the recently added tranche of tariffs on Chinese goods scheduled to go into effect on October 1 to October 15. The “gestures of good will” from Washington and Beijing come at an interesting time in light of the 70th anniversary of the People’s Republic of China at the beginning of next month.

DOW JONES INDEX PRICE CHART: DAILY TIME FRAME (MARCH 26, 2019 TO SEPTEMBER 12, 2019)

DJIA Dow Jones Index Price Chart Stock Market Gains on US China Trade War News Tariff Delay

Chart created by @RichDvorakFX with TradingView

Furthermore, headlines have just crossed the wires that Trump administration officials deliberated the idea of “offering a limited trade agreement” with a narrower scope. The move would be aimed at breaking the Sino-American trade war deadlock and making progress toward scaling back tariffs if the Chinese agree to the resumption of US farm goods and provide commitments on intellectual property rights. Worth mentioning, however, is that President Trump still has yet to confirm the latest US-China trade war headlines on his personal twitter account – POTUS’ preferred medium of releasing these types of comments.

Shortly after the “limited trade agreement” headlines were dropped by Bloomberg, a contradicting story was released by CNBC stating that the Trump administration is “absolutely not” considering an interim trade deal with China. Nevertheless, US equities remain buoyed by hopes that US-China trade relations will continue to improve.

DOW JONES INDEX PRICE CHART: 5-MINUTE TIME FRAME (SEPTEMBER 10, 2019 TO SEPTEMBER 12, 2019)

Dow Jones Industrial Average Price Chart Rises on Trump Tariff Delay US China Trade Relations Improve

Chart created by @RichDvorakFX with TradingView

In fact, the Dow Jones Industrial Average (DJIA) now traders a mere 150 points away from its all-time high of 27,398.70 printed on July 16. The jump in the Dow Jones was accompanied by a similar bounce in the US Treasury yield curve – judging by the increasing interest rate spread between the 10-year and 2-year maturities – as the latest trade war developments spur risk appetite and global GDP growth prospects. On a similar note, stock market volatility measured by the VIX Index flopped to its lowest reading since August 1. As such, the Dow Jones may soon grasp for record highs.

While the upbeat news out of the US-China trade war front has provided Wall Street with a reason to celebrate, stock price gains are likely to be limited barring no confirmed substantive breakthrough toward a trade deal. Likewise, investors remain on edge with lingering monetary policy uncertainty surrounding the Federal Reserve. The Fed is scheduled to release its latest decision on interest rates and economic projections at its September FOMC meeting next week.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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