DOW FUT : China`s Truce
(Thu, 9 July 2020). China is committed to growing China-US relations "with goodwill and sincerity” according to Chinese officials on Thursday. At a time of escalating tensions in a pandemic year, conciliatory remarks from Beijing to uphold U.S. relations are a welcome change.
Dow Jones Industrial Average (DJIA) futures were slightly lower on Thursday. Chinese officials struck an optimistic tone overnight, pledging to “grow China-US relations with goodwill and sincerity.” The remarks will settle Wall Street nerves over recent Sino-US relations. Dow Jones Industrial Average futures were marginally lower in premarket trading Thursday, down 47 points.
The index was saved a deeper plunge by promising remarks out of China overnight. State Councilor and Foreign Minister Wang Yi doubled down on the country’s relationship with President Trump and the U.S. China’s US policy remains unchanged. We are still willing to grow China-US relations with goodwill and sincerity. It’s a welcome statement after months of growing tension between the two nations.
Dow Futures Hold Steady On Thursday
Dow futures point to a slight dip ahead of the open on Thursday. As of 5.16 am ET, the index was 47 points lower – a steady performance by recent standards. It follows yesterday’s strong session which saw the Nasdaq hit another record high. S&P 500 futures were down 0.2% while Nasdaq Composite futures pushed 0.15% higher.
Chinese stocks enjoyed their eighth-straight day of gains. Gold also hit the headlines after surpassing $1,800 to mark its highest level since 2011.
President Xi Committed To US-China Partnership
Wang made the optimistic remarks at a China-U.S. think tank event on Thursday. In an English translation of his statement, he stressed that President Xi is committed to a strong relationship. President Xi Jinping has underlined on many occasions that we have a thousand reasons to make the China-US relationship a success, and none whatsoever to wreck it.
Wang acknowledged that China and the US face a “severe challenge” in the currenct climate. President Trump has blasted China over its handling of the pandemic. The phase one trade deal was thrown into doubt. And, just this week, Secretary of State Mike Pompeo threatened to ban TikTok – the social media app owned by Chinese tech company ByteDance.
With tensions near breaking point, Wall Street will be relieved to hear a conciliatory tone from Chinese officials. I’d like to stress here again that China never intends to challenge or replace the US, or have full confrontation with the US.
Dow Jones Can Go Higher From Here
Despite the subdued start to Thursday’s trading session, analysts are optimistic about the second half of the year. Nupur Gupta, portfolio manager at Eastspring Investments, told Bloomberg this morning that equities can certainly go higher. She said a combination of central bank liquidity and safe re-openings will spur the S&P 500 and Dow Jones higher in the coming months. The only risk? If a second-wave becomes “more entrenched” and further lockdowns are required.
What To Watch On The Stock Market Today
As always, all eyes are on Thursday’s initial jobless claims data. The data is expected to remain stubbornly above one million fresh claims. A MarketWatch poll predicts 1.4 million new claims this week. Another million unemployed may take the shine off last week’s impressive Labor Department report which saw a surprise jump in new jobs.
Elsewhere, investors are bracing themselves for the most unpredictable earnings season in history. Esty Dwek, head of global macro strategy at Natixis Investment Managers, said Wall Street is scrambling to upgrade targets. A positive sign, but she remains cautious.
We are seeing, so far, pretty much a V-shape [economic] recovery. I think one of the big tests coming up is the Q2 earnings season and whether it is as bad as expected or surprises on the upside like a lot of the economic data has. The first early results are trickling in this week. The big-hitters are due next week.
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