The Dow Rose 147 Points Because China and the U.S. Haven’t Stopped Talking About Trade

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Seesaw. U.S. stock markets rebounded on Wednesday as sentiment about the U.S.-China trade talks improved.

Oil prices jumped as well, after Iraq and other members of the Organization of the Petroleum Exporting Countries signaled support for deeper output cuts ahead of two days of meetings among producers that begin on Thursday. The U.K. is awaiting another general election next week.The British pound was trading at seven-month highs versus the dollar as the latest polls suggested that the Conservatives are leading the Labour Party by a large margin and are likely to command a majority in Parliament. In today’s After the Bell, we…

  • wonder whether a “phase one” trade deal can be reached this year;
  • watch the U.S.-China conflicts escalate again with the new Uighur bill;
  • and worry about slowing growth in the service sector in November.

Back and Forth on Trade

After falling for two consecutive sessions, stocks jumped as trade sentiment improved again. The Dow Jones Industrial Average added 146.97 points, or 0.5%, to 27649.78, while the S&P 500 gained 19.56 points, or 0.6%, to 3112.76 and the Nasdaq Composite rose 46.03 points, or 0.5%, to 8566.67.

President Donald Trump said on Tuesday that a deal might not get done until after the 2020 election, while Commerce Secretary Wilbur Ross said tariffs on Chinese imports due to take effect Dec. 15 will proceed if nothing significant happens before the deadline.

Stocks tumbled on the news, but regained some ground on Wednesday after reports came out that the U.S. and China have not stopped talking and are moving closer to agreeing on the amount of tariffs that would be rolled back in a “phase one” trade deal, as well as how to guarantee China’s purchases of U.S. farm products.

Still, the road ahead has been made rougher by continuing political disputes between the two countries.

Beijing is already angry about a bill in support of Hong Kong protesters that was signed by Trump last week. Now, the House of Representatives has passed a bill in support of China’s ethnic Muslim Uighur minority in Xinjiang province. Like the Hong Kong bill, the legislation would require the president to sanction Chinese government officials involved in the repression of Uighurs. The bill has yet to be approved by the Senate, or signed by Trump.

On Wednesday, China’s foreign ministry condemned the move and said that the bill smears China’s efforts to combat extremism. “We urge the U.S. to immediately correct its mistake, to stop the above bill on Xinjiang from becoming law, to stop using Xinjiang as a way to interfere in China’s domestic affairs,” said a statement.

Elsewhere, U.S. economic growth continues to slow down. Weakness in the manufacturing sector is spilling over to service-oriented companies such as hospitals, retailers, and restaurants. An Institute for Supply Management survey of the nonmanufacturing sector yielded a result of 53.9 in November, down from 54.7 in the prior month, falling short of what economists expected.

Although the reading is still above 50, which indicates economic expansion, the index has come down sharply from its high of 60.8 for this economic cycle, reached just a little over a year ago. ISM’s manufacturing index has been below 50 for four months.

The data on private payrolls released by ADP also came in weaker than expected. Private-sector employment increased by 67,000 jobs in November, well below October’s growth of 121,000. The consensus forecast among economists was that payrolls would grow by 140,000.

Investors will now watch for November’s employment numbers, set to be released Friday morning. Economists expect the data will show nonfarm payrolls increased by 186,000 in November, up from 128,000 in the prior month, partly because union workers at General Motors were on strike in October.

Write to Evie Liu at evie.liu@barrons.com