Wall Street rallies on US/China trade deal Phase 1 agreement

U.S. stocks rallied on Friday following a positive outcome of the high-level trade negotiations between the US and China on Friday. Consequently, the Dow Jones Industrial Average rallied over 500 points or 2% at its highest level. The Dow Jones Industrial Average rose 319.92 points, or 1.2%, to 26,816.59, the S&P 500 index climbed 32.14 points, or 1.1%, to 2,970.27, while Nasdaq Composite Index added 106.26 points, or 1.3%, to 8,057.04. For the week, the Dow climbed 0.9%, while the S&P 500 and Nasdaq added 0.6% and 0.9% respectively.

Announcements were made just ahead of the Wall Street close following the meeting between President Trump, colleagues and Chinese Vice Premier Liu. Trump said that they have come to a substantial phase 1 deal with China. However, gains lost momentum toward the close following the announcement of a Phase 1 agreement lacked clear details.

Subsequent statements from Trump as follows:

• The agreement is a ‘big deal’; It is better to do deal in ‘sections or phases’.
• We have mode progress on tech transfer, more on that in phase 2.
• Also agreed on currency and FX issues.
• Structural AG issues have also been addressed.
• China has agreed to make 40-50bln USD in AG good purchases.
• Will take up to 5 weeks to get deal written.
• Have come to deal on intellectual property, financial services and big AG purchases.
• The currency deal will be of tremendous benefit.
• We are very close to ending trade war.
• To do a formal signing with Chinese pres. Xi
• Signing could happen at APEC Chile 2019 (Nov 16-17).
• Not expecting deal to fall apart over next few weeks, ‘though there is a possibility’ it will.
• Phase 2 of deal to include some IP aspects.
• Discussed Hong Kong.
• Things have toned down there and he thinks that’s going to take care of itself.
• We will look at the blacklist and what companies should be on it.
• Fed should cut rates despite this deal.
• Little doubt that we will be able to finalize this deal.

Additionally, there was no decision made planned on a new 15% tariff set to go into effect on December 15 on about $160 billion in annual Chinese imports.

DJIA levels

The index extended gains in a reversal of the end of September slide and scoring through the 27000 psychological level, albeit leaving a bearish pin-bar on the daily chart with price moving back tot he trendline resistance turned support. Next week's open will reveal whether the 27500s and a break of the July highs will be achievable in the near-term. Bears will otherwise seek a close back below the trendline with a focus back on the 200-DMA down in the 26400s.