U.S. stocks ended slightly higher Friday at the end of a choppy session. Throughout the day, investors struggled to square up terms of a phase one trade deal as described separately by Chinese and U.S. officials. The Dow swung between an as much as 158 point gain and 60 point loss.
Each of the three major indices ended slightly higher on the week.
Here’s where markets settled at the end of regular equity trading:
S&P 500 (^GSPC): +0.01%, or 0.23 points
Dow (^DJI): +0.01%, or 3.33 points
Nasdaq (^IXIC): +0.2%, or 17.56 points
10-year Treasury yield (^TNX): -7.8 bps to 1.821%
Gold (GC=F): +0.56% to $1,480.60 per ounce
During a press conference in Friday, Chinese officials said they were working to set a date to sign a so-called phase one trade deal and corroborated earlier reports that terms of the agreement had been reached. According to Beijing, the deal would see the U.S. lift existing tariffs on Chinese goods in phases.
Within a half-hour of the start of the press conference, President Donald Trump wrote in a pair of Twitter posts that Washington had “agreed to a very large Phase One Deal with China.” However, he said that existing tariffs on Chinese goods would remain in place.
“They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more. The 25% Tariffs will remain as is, with 7 1/2% put on much of the remainder....” Trump said.
He added: “.....The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election. This is an amazing deal for all. Thank you!”
Chinese officials declined to comment on Trump’s tweet when asked about it by reporters during the press briefing.
At the conclusion of the Chinese press conference, the Office of the U.S. Trade Representative put out a statement detailing that both sides had “reached an historic and enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.”
As part of the deal, China had agreed to make “substantial additional purchases of U.S. goods and services in the coming years,” according to USTR.
“The United States will be maintaining 25 percent tariffs on approximately $250 billion of Chinese imports, along with 7.5 percent tariffs on approximately $120 billion of Chinese imports,” USTR said in the statement.
According to Capital Economics analysis, the USTR’s Section 301 tariff updates would reduce the average tariff on Chinese imports to 15.5% from 17%. This, however, would still be “roughly double the average tariff rate at the beginning of 2019,” said Michael Pearce, senior U.S. economist for Capital Economics.
The shifting trade rhetoric Friday and swift market reactions substantiated many investors’ beliefs that prospects for a lasting U.S.-China trade deal remained on shaky ground, even amid apparent progress in the latest rounds of negotiations.
While any form of a U.S.-China trade deal would better position the world economy for continued growth, it would not likely be a convincing enough move to rebuild companies’ trust in historical global trade rules and supply chain dependability, Paul Donovan of UBS wrote in a blog post Friday.
“For thirty years, large companies invested in global supply chains. Global supply chains worked because global trade rules were known and trusted. The U.S. attracted foreign investment as a link in these supply chains,” he explained.
“Now the trust has gone. Investment in developed economies has slowed dramatically since early 2018,” Donovan added. “Would a Phase 1 trade deal rebuild trust in global trade structures? It seems unlikely. The US has reversed trade agreements with Argentina and Brazil. A company investing in a global supply chain may worry that a Phase 1 trade deal will not last once Chinese food prices decline, or the US elections are held. Without that trust, investment will be limited.”
Separately, the results of the British general elections overnight showed a historic victory for Prime Minister Boris Johnson’s Conservative party, which won 365 of 650 total seats as of the final count Friday afternoon. Conservatives required just 326 seats in parliament to form a government.
This represented the best election result for the Conservative party since it won 376 seats in the House of Commons under Margaret Thatcher in 1987.
The major victory suggests Johnson will be able to pass a Brexit deal more easily, after both he and predecessor Theresa May failed to rally enough support for their respective withdrawal strategies numerous times over the past couple years. Johnson has vowed to deliver Brexit before January 31.
The British pound initially surged against the U.S. dollar (GBPUSD=X) and euro (GBPEUR=X) after the election results before paring some gains Friday morning ET. London’s FTSE 250 (^FTMC) rocketed to close at a record high.
November retail sales miss expectations
Retail sales rose just 0.2% in November after an upwardly revised 0.4% increase in October as spending on clothing and health and personal care stores declined during the month, the Commerce Department said in its advanced monthly report Friday.
Consensus economists had expected an increase of 0.5% in retail sales for November.
The disappointing result was led by a 1.1% monthly decline in sales at health and personal care stores, along with a 0.6% decline in sales at clothing and accessories retailers. Non-store retailers, or e-commerce stores, led with a 0.8% increase in November sales.
Excluding more volatile auto and gas sales, retail sales were flat in November, missing expectations for a 0.4% rise. The so-called core measure of retail sales excluding autos, gas, building materials and food services ticked up by just 0.1% in November, versus a 0.3% increase expected.
The lower than expected headline result brings total retail sales up by only a 0.9% seasonally adjusted annual rate over the three months to November, according to JPMorgan economist Daniel Silver, representing a downshift from earlier this year.
“But the broad set of consumer-related indicators still looks healthy, and combining a variety of related inputs, we think that real consumption growth is still on pace for a decent fourth quarter,” Silver said.
“Moreover, it is probably worth waiting until the December sales data are released to take a strong view of consumer spending during the holiday season given the possibility that the late timing of Thanksgiving this year could have pushed some holiday shopping from November into December,” he added.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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