Possible US-China trade deal to stimulate global stock prices

Global equity markets, especially in Asia and Europe, will open upward on Monday after China and the United States are close to finalizing a deal.

The performance of US stock markets improved after the announcement of the US and China approaching the first phase of the trade deal. But most markets in Asia and Europe were closed before the announcement. The S&P 500 closed at its second highest in history on Friday, while the Dow Jones Industrial Average closed less than 1.5 per cent after the corporate financial results.

The S&P 500 rose 0.4 percent to 3,022 while the Dow Jones gained 0.6 percent to 26,958 points last Friday. The Nasdaq jumped 0.7 per cent to 8,243 points. The FTSE 100 fell 0.1 per cent to 7,324. While Frankfurt, Paris, Euro Stoxx, Tokyo and Shanghai gained, Hong Kong and London indices fell at the end of Friday’s sessions.

Although markets were supported by trade deal news, markets across Asia and Europe are expected to open higher on Monday and are likely to trade positively in the coming days on the back of the Fed rate cuts and more clarity on the Brexit issue, both from the European Union as well as positive corporate financial results.

Timothy Fox, head of research and chief economist at First Dubai Bank, said some stings appeared to emerge from US-China trade talks.

“Both sides certainly seem keen to play up the progress being made, probably for domestic political reasons in the US case as Trump faces impeachment proceedings and following a number of foreign policy blunders. China for its part has to contend with a sharply slowing economy with real GDP growth in third quarter posting just 6 per cent, the weakest expansion in some thirty years. Thus it is probably in both parties’ interests to accentuate the positive for the time being, which should also help market sentiment to remain relatively favourable, ” he said.

The United States and China have imposed billions of tariffs on each other’s goods, hurting their respective financial markets and causing concern that the conflict will force the global economy to shrink.

Regarding the earnings reports already received, analysts expect the S&P 500 quarterly profit to fall from July to September by 3.7 per cent from last year. This is slightly better than the 4 per cent decline that analysts had initially expected.

On the issue of Brexit, London is awaiting the EU’s decision to delay the Brexit. But Britain’s culture minister, Nick Morgan, warned lawmakers on Sunday that October 31 was still the default date for Britain’s exit, calling on parliament to back Prime Minister Boris Johnson’s attempt to hold elections on December 12.

Gulf stock markets fell on Sunday, after a series of disappointing results in Saudi Arabia, while Egypt markets rose with the recovery of real estate stocks.

In Dubai, the index closed 0.1 per cent supported by real estate stocks. Emaar Properties, the largest listed developer in the emirate, added 0.2 per cent. Abu Dhabi’s main index fell 0.3 per cent, winning a series of four-day victories with First Abu Dhabi Bank and Abu Dhabi Islamic Bank by 0.8 per cent.

In Saudi Arabia, the benchmark index fell 0.3 percent, a three-day victory, as Saudi Basic Industries (SABIC) fell 1.2 percent after a 86 percent drop in third-quarter net profit.


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