Markets Face New Challenge With Conflicting Trade Signals

Date : 11/28/2019 @ 6:44PM
Source : Dow Jones News
Stock : FTSE 100 Index (UKX)
Quote : 7250.27  34.02 (0.47%) @ 11:36AM
FTSE 100 share price Chart

Markets Face New Challenge With Conflicting Trade Signals

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1 Month : From Nov 2019 to Dec 2019

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By Avantika Chilkoti and Paul Vigna 

The advance in U.S. stocks faces a new challenge Friday: concerns over U.S.-China relations after President Trump signed a bill supporting Hong Kong protesters.

While the Dow Jones Industrial Average index climbed to end Wednesday at yet another record, futures linked to the gauge edged down during the Thanksgiving holiday. The pan-continental Stoxx Europe 600 index, meantime, has rallied 1.3% so far this week as it inched closer to the all-time high it hit in April 2015, and the Shanghai Composite Index ticked up less than 0.2%.

Mr. Trump's support for the bill, which requires the State Department to assess Hong Kong's autonomy every year, may raise fresh hurdles in the trade negotiations between the world's two largest economies. Speculation about the ultimate outcome of the talks -- which have been complicated by a range of issues including the protection of intellectual property rights, the purchases of agricultural products and the threat of new and existing tariffs -- have led to swings in investor sentiment and markets for months now.

Beijing, which has criticized what it calls U.S. interference in China's domestic affairs, has shifted focus to whether the president would implement any of the bill's measures, according to officials involved in economic policy making. China is still leaving the door open for the trade deal as leaders in Beijing look to alleviate pressure on its fast-weakening economy.

"It is certainly a notable added complication," said Richard McGuire, a rates strategist at Rabobank.

Earlier in the week, all three major U.S. equity indexes had reached records as traders also cheered U.S. economic reports that showed more growth than expected. Third-quarter gross domestic product was revised to up 2.1% from 1.9% and October durable-goods orders rose more than anticipated. Jobless claims for last week fell.

"The economy is not about to fall off a cliff," Gregory Daco, chief U.S. economist at Oxford Economics, wrote in a note. "However, the lingering global industrial slump, persistent trade policy uncertainty and cooling income growth all point to weaker activity in the coming months."

Mr. Trump had also stoked hopes that negotiations may be advancing between the world's two largest economies when he said Tuesday that the U.S. and China were in the "final throes of a very important deal."

Despite the short-term gloom, as 2019 draws to a close a slew of equity indexes have hit new records this week on the back of easy monetary policy and hopes that geopolitical tensions around trade and Brexit are set to ease.

Australia's ASX 200 benchmark index closed at a new high Thursday, followed with a record set by India's Sensex gauge.

Over in Europe, the U.K.'s FTSE 100 equity benchmark declined 0.2% Thursday after a closely watched poll suggested that Prime Minister Boris Johnson's Conservative Party is poised to secure a majority in next month's general election. The British pound rose to a six-month high, and was recently trading at about GBP0.85 to the euro.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Paul Vigna at paul.vigna@wsj.com

 

(END) Dow Jones Newswires

November 28, 2019 13:29 ET (18:29 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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