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Wall Street Weekahead: Trump-Xi trade armistice clears way for more market gains

Reuters  |  NEW YORK 

By and Lewis Krauskopf

NEW YORK (Reuters) - One of the darkest clouds hanging over Wall Street somewhat dissipated on the weekend when and the agreed to shelve any new tariffs and reset discussions, at least temporarily halting an increase in their tensions over trade.

Investors said the agreement, lasting 90 days, between Chinese and U.S. at the summit spelled a reprieve for stocks and could pave the way for a positive bookend to a volatile trading year.

U.S. stock index futures jumped as trading for the week began late on Sunday, with benchmark S&P 500 futures up 1.55 percent. Treasury futures were soft, suggesting an appetite for risk-taking could extend last week's gains in the

The trade tension between and Beijing, along with an uncertain outlook for U.S. rate hikes, have for months dogged prospects for equities. The U.S. pledge not to boost tariffs on $200 billion of Chinese goods could mark the most important deal in years between the world's top two economies.

"It sets a pretty positive tone (and) stocks should have a decent rally into December," said Nathan Thooft, Boston-based global allocation for

Thooft said he believed the was using a threat to raise tariffs to 25 percent on Jan. 1, from 10 percent now as a negotiating tactic. "So when you start to see evidence that there is the ability to come to some type of agreement, that has to be viewed as a positive," he said.

The logged an official correction after a selloff in October and continued volatility in November that, just over a week ago, had left the benchmark S&P 500 stock index down 10 percent from its all-time high.

Markets rebounded last week on comments perceived as dovish from Federal Reserve Jerome Powell, though the S&P was up only 2.4 percent in 2018.

The latest trade standoff began in September when the imposed the 10-percent tariffs, prompting to respond with its own. Ahead of the leaders' dinner in Argentina, investors had been bracing for a range of outcomes including a worse-case end to talks and more tit-for-tat measures that would have continued to crimp economic and corporate profit growth.

Instead, the Americans and Chinese officially lauded the result.

agreed to buy what the called a "very substantial" amount of agriculture, energy, While the clock ticks on the 90-day reprieve, the two sides will try to work out thorny issues including transfer, intellectual property and cyber theft.

"It's not solved by any stretch of the imagination," said Thooft. But risk assets and cyclical U.S. sectors like materials and industrials should benefit, he said on Sunday.

An initial jump late on Sunday of nearly 2 percent in Nasdaq 100 futures suggested that companies, many of which were hardest hit in the selloff, could rebound.

Gary Shapiro, of the Consumer Association, said he was encouraged by the trade talks and warned that raising tariffs to 25 percent as the had threatened "would likely hurt consumers, put several American companies out of and displace thousands of American workers."

POWELL TESTIMONY

prices could also rebound on Monday since cooling trade tensions could boost the world and spur demand.

had dropped from a four-year high of about $76 per barrel in early October to just above $50 on Friday. But U.S. was up 2.7 percent to $52.37 a barrel as of 6:07 p.m. EST (2307 GMT) on Sunday.

Aside from trade policy, Wall Street's attention has also been trained on Fed policy.

Powell was scheduled to testify on Wednesday to a congressional But the hearing is expected to be postponed to Thursday because major exchanges will be closed on Wednesday in honor of former U.S. George H.W. Bush, who died on Friday at the age of 94.

Last week, Powell backed the Fed's gradual tightening but said its policy rate was "just below" a range of estimates of the so-called neutral level that neither stimulates nor cools growth. In response, stocks shot up and largely recovered November's earlier losses.

In the wake of Powell's speech, Nicholas Colas, of DataTrek Research, said "what happens in will determine if stocks post a positive 2018."

The specter of a global trade war has hovered over the market since March, when Trump announced tariffs on imported and aluminum. He also recently said the was studying auto tariffs, which could ripple through and Japan, while a pact with and left some investors heartened about potential progress with

Nancy Lazar, Cornerstone Macro, said in a notes that the 90-day delay and China's "incremental concessions" are good

"But given the stern U.S. stance, we're certainly not raising our outlook," she said of a 2.8-percent growth estimate for the fourth quarter, still comfortably above potential.

With U.S. corporate leaders increasingly voicing concerns over rising costs associated with tariffs, Wall Street appeared set on Monday to welcome any development that eases those pressures.

(Reporting by and Lewis Krauskopf; Editing by and Sandra Maler)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, December 03 2018. 09:19 IST
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