Wall Street awaits details of Trump’s China trade deal

U.S. stocks rose in early trading after closing at all-time highs on Thursday amid renewed optimism that the U.S. and China are close to reaching a deal in their costly trade war. Shares gained slightly Friday even though President Donald Trump tweeted that a report about a done trade deal was “completely wrong.”

The Dow rose 152 points to 28,284 in early trading on Friday morning after The Wall Street Journal reported that the Trump administration and China are close to finalizing a modest “Phase 1”  trade agreement that would suspend tariffs that are set to kick in Sunday, de-escalating their 17-month trade war. The S&P 500-stock index and the tech-heavy Nasdaq composite also gained. 

However, Mr. Trump appeared to dispute the report in a Friday morning tweet: “The Wall Street Journal story on the China Deal is completely wrong, especially their statement on Tariffs,” he wrote.

On Friday morning, Chinese officials said the U.S. and China had reached an agreement on text of a phase one trade deal, according to CNBC.

The market has been quick to react to headlines and remarks out of the Trump administration about the 16-month trade war. Uncertainty over trade has been the biggest wild card for stocks this year. The longstanding conflict has hurt manufacturing around the world and caused U.S. businesses to hold back on making investments. The saving grace for the American economy has been a strong job market and consumer spending.

Still, even as investors await official word on a trade deal, Wall Street analysts said they believe a U.S.-China deal could boost investor confidence and alleviate global anxiety about trade.

“This is definitely better than our base-case scenario and removes some worries about the trade war escalating further and weighing on the growth momentum,” TD Securities said in a note to clients about the reported trade deal.

An official with the U.S. Chamber of Commerce, who had been briefed by both sides, said the administration has agreed to suspend Trump’s plans to impose tariffs on $160 billion in Chinese imports Sunday and to reduce existing tariffs.

In return, Beijing would buy more U.S. farm products, increase Americans companies’ access to the Chinese market and tighten protection for intellectual property rights.

“Big deal” with China

Shares jumped on Thursday after President Donald Trump said that the U.S. is getting close to a “big deal” and even “massive” with China. Traders were also encouraged by a Wall Street Journal report saying Washington has offered to slash existing tariffs and cancel new ones set to kick in on Sunday in exchange for more agricultural purchases and intellectual property protection.

“If we do see the tariffs removed, that’s saying, ‘OK, China must be agreeing to things or we must be right there,'” said Ben Phillips, chief investment officer at EventShares. “That’s why the market is looking at tariffs as the bellwether to a trade deal.”

China’s commerce ministry said Thursday that its negotiators were in “close communication” with their American counterparts ahead of the new round of tariffs, but gave no indication whether the trade talks were making progress.

Speculation that the world’s two biggest economies could be close to reaching an interim Phase 1 trade agreement spurred investors on Thursday to move money into technology, industrial and other stock sectors that tend to do well when the economy is growing.

“If we get a China trade deal, it’s probably going to catalyze another 12-plus months of growth in the U.S. and globally,” Phillips said.

While investors continue to wait for an official word on a possible U.S.-China trade deal, they’ll get a look at new economic data Friday. The Commerce Department is due to report its November snapshot of retail sales. Economists expect retail sales rose last month. The measure gives more insight into consumer spending, which has been among the brighter spots in the economy helping to push growth.