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Wall Street Rallies as US-China Trade Tensions Cool Off

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Apr 10, 2018
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Stock markets around the globe today bounced back as investor fears over the impending US-China trade war began to relax due to friendly statements from both U.S. President Trump and China President Xi.

Major market indices reacted with the Dow Jones Industrial Average (INDEXDJX:.DJI) up 1.8% and the S&P 500 (INDEXCBOE:.INX) up nearly 1.7%. The NASDAQ 100 (INDEXNASDAQ:NDX), which includes 100 of the largest non-financial companies listed on the Nasdaq Stock Market did very well, ending the day at a 2.2% gain.

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The technology sector did very well today with Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) leading the charge. Facebook outpaced tech in general and this might be due to the opening round of testimony Mark Zuckerberg gave today which was generally received in a positive light. AMD (NASDAQ:AMD), NVIDIA (NASDAQ:NVDA ), Apple (NASDAQ:AAPL), Snapchat (NYSE:SNAP), and the just-listed Spotify (NYSE:SPOT) all did well and in-line with the rest of the technology sector.

Some analysts think this is just par for the course in a market that will continue to be volatile moving forward. Kevion Caron is a senior portfolio manager at Washington Crossing Advisors and counts himself among those that expect to see more swings in the market.

“Without the underlining dynamism of momentum in the markets and supported by improving fundamentals, there is going to be a tendency for the market to be knocked around by headlines. As we go to the next week or so, this back and forth on trade probably dominates.”

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What exactly was said by leaders of state in terms of US – China trade?

President Xi Jinping at the Boao Forum for Asia, April 10th, 2018

China President Xi Jinping pledged that his nation intends to open its borders to more international investment during a talk at a business forum in Boao on the southern island of Hainan. He discussed raising foreign equity limits in securities, insurers and banks. Xi also highlighted lowering auto tariffs and allowing further investment into Chinese manufacturing. Perhaps most relevant to current events and possibly directly squarely at Trump the Chinese president proposed setting up a brand new state agency tasked with protecting foreign intellectual property.

Trump was quick to garnish colorful praise on the Chinese leader, calling his remarks “enlightening and kind”.

However many analysts are pointing out that what President Xi said amounts to almost nothing of substance. His words reflect China’s already existing initiatives that aim to both open select markets to foreign investment as well as relax certain import duties. China did offer something new in its offer to slash $50 billion from the trade deficit via increased imports of U.S. goods like luxury items, hydrocarbons, produce, and semiconductors. Keep in mind this is only a 10-15% reduction in the trade deficit depending on how you calculate it.

Whether or not President Xi’s words will carry any weight remain to be seen but at least for now some optimism has returned to the stock market.

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