The three major indexes moved higher on Tuesday after reports surfaced that the United States and China are narrowing their differences as trade negotiations continue.
On Monday, U.S. President Donald Trump said that talks with China on a trade deal were progressing and that weakness in the country’s economy is paving the way towards a resolution. The president also tweeted on Tuesday that talks with China are moving forward in the right direction.
Talks with China are going very well!
— Donald J. Trump (@realDonaldTrump) January 8, 2019
President Trump and Chinese President Xi Jinping met at the G-20 Summit in Buenos Aires, putting global markets on pause as the two economic superpowers met to hopefully ameliorate their trade differences. As part of the agreement, both nations agreed to withhold imposing further tariffs on each other for 90 days while they work out a firm, ironclad deal.
The U.S. agreed to keep the current 10% tariffs on over $200 billion worth of Chinese goods while an agreement is negotiated, but will increase to 25% if no agreement is reached prior to the 90-day deadline.
“The U.S.-China power struggle will persist for years, but both economies are now slowing and neither government has the latitude to pursue policies that could threaten to trigger a global recession,” said strategists at MRB Partners. “The Argentina handshake will morph into a near-term truce.”
The Dow Jones Industrial Average gained as much as 300 points, while the Nasdaq Composite and the S&P 500 were both in the green slightly.
Last Friday, markets soared as job growth surged to 312,000 during the month of December, handily beating economists’ expectations of 176,000 nonfarm payrolls added. The data caps off what’s been a rough start for the capital markets in 2019 amid global growth concerns.
The markets were also sent higher on Federal Reserve Chairman Jerome Powell saying that the central bank will exercise more patience with respect to raising interest rates. The Federal didn’t show much dynamism in 2018 with respect to monetary policy, obstinately sticking with a rate-hiking measure with four increases in the federal funds rate.
That appears to have changed given the current economic landscape, and especially in the capital markets as Powell is now preaching patience and adaptability.
“As always, there is no preset path for policy,” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.”
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