Trade War Truce? U.S. Stocks Surge after Trump-Xi Phone Call

The Dow and broader U.S. stock market surged on Tuesday after President Trump offered some reassurance that trade talks with China were progressing favorably, signaling the end of a month-long stalemate between the two superpowers.

Dow Surges 300 Points

All of Wall Street’s major indexes opened higher on Tuesday and continued to gain through the late-morning session. The Dow Jones Industrial Average advanced 325.27 points, or 1.3%, to 26,437.80. The blue-chip index was up more than 400 points earlier in the session.

Dow Jones Industrial Average
Dow Jones Industrial Average approaches six-week high on Tuesday. | Source: Yahoo Finance.

The broad S&P 500 Index of large-cap stocks surged 1.1% to 2,920.42, its highest in over two months. Eight of 11 primary sectors reported gains, led by information technology.

Meanwhile, the technology-focused Nasdaq Composite Index climbed 1.6% to 7,968.85.

Trade Talks Back On

The stock-buying frenzy picked up the pace after President Trump tweeted that he “had a very good telephone conversation with President Xi of China,” and looked forward to meeting his counterpart at the upcoming G20 summit in Japan.

Trump also confirmed that the two countries will resume trade negotiations prior to the meeting next week.

Trade negotiations have been on the back burner since early May after China reportedly reneged on a deal. President Trump responded by increasing tariffs on Chinese imports, a move that was met with a swift response from Beijing.

Trade-war hostilities contributed to a sharp decline in U.S. and global equity markets last month. They also prompted the Federal Reserve to adopt an even more cautious approach to monetary policy, with Chairman Jerome Powell conceding that rate cuts were on the table.

More ECB Stimulus Coming

Equities opened sharply higher on Tuesday after European Central Bank (ECB) President Mario Draghi hinted that additional rate cuts may be necessary to help stimulate a moribund Eurozone economy. As The Wall Street Journal reports, Draghi signaled that a fresh round of stimulus could be implemented at the next ECB policy meeting in July.

Draghi’s comments sent the euro tumbling against the dollar, a move that drew the ire of President Trump almost immediately.

“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA,” Trump tweeted Tuesday.

A weaker euro would certainly help the export-oriented Eurozone remain competitive at a time when regional growth is almost non-existent. The Trump administration has already accused Germany and other Eurozone paymasters of manipulating the common currency to serve their trade objectives.

As of 12:00 p.m. ET, the EUR/USD exchange rate was down 0.2% to 1.1196. The common currency reached a session low of 1.1180.

Featured image courtesy of Shutterstock. Chart via Yahoo Finance.

 

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi