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Stocks rally, dollar retreats on US-EU trade announcement
NEW YORK, July 26, 2018 (BSS/AFP) – Wall Street stocks rose and the dollar
fell Wednesday after US President Donald Trump and European Commission chief
Jean-Claude Juncker reached an agreement to defuse a festering trade dispute.
The agreement, though short on details, means Washington will not follow
through with a threat to impose tariffs on autos, which would hurt German
carmakers.
That favorable news appears to mitigate perhaps the biggest fears in
financial markets — that Trump’s confrontational approach toward the EU and
other trading partners would mushroom into a global trade war that slows
economic growth.
“They reached a cold peace where they decided they weren’t going to
accelerate the cycle of retribution,” said Boris Schossberg, a foreign
exchange expert and founding partner at BK Asset Management.
“Today was the first positive sign that the Trump administration is
willing to negotiate and not just threaten in its desire to create a more
open trade environment.”
Global investors were cautious ahead of the looming Trump-Juncker
negotiations, with stock bourses in Paris, Frankfurt and London all falling.
US stocks too opened the session hesitantly, with the Dow lingering in
negative territory throughout the morning.
But US stocks began rallying after a Wall Street Journal report about 30
minutes before the closing bell that said that Trump had secured concessions
from Europe to avert a trade war.
“We need the details, but it seems that we avoided the war,” said Gregori
Volokhine, president of Meeschaert Capital Markets.
US stocks ended the day decisively higher, with the Nasdaq surging 1.2
percent to a fresh record of 7,932.24.
– Euro rises –
The White House announcement also sparked a lurch lower in the dollar
against the euro and other currencies.
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Schlossberg called the advance of the euro a “relief rally” at the
recognition that the auto tariffs would have hit badly bruised the European
economy.
“A trade war would have been asymmetrically worse for Europe,” he said.
Analysts expect the European Central Bank to leave unchanged Thursday
plans to end massive stimulus for the eurozone by December.
Worries about the trade conflict battered auto stocks Wednesday,
especially after both General Motors and Fiat Chrysler cut their full-year
forecasts.
GM fell 4.6 percent, while FCA plummeted 11.8 percent.
FCA’s results were published shortly after it was announced that Sergio
Marchionne, who helped turn around Fiat and merged it with US carmaker
Chrysler, had died. The 66-year-old stepped down at the weekend following
complications from surgery.
Ford, which was scheduled to report earnings later Wednesday, dipped 0.5
percent and fell another 4.0 percent in after-hours trading after it cut its
full-year forecast.
– Key figures at 2100 GMT –
New York – Dow: UP 0.7 percent at 25,414.10 (close)
New York – S&P 500: UP 0.9 percent at 2,846.07 (close)
New York – Nasdaq: UP 1.2 percent at 7,932.24 (close)
London – FTSE 100: DOWN 0.7 percent at 7,658.26 (close)
Frankfurt – DAX 30: DOWN 0.9 percent at 12,579.33 (close)
Paris – CAC 40: DOWN 0.1 percent at 5,426.41 (close)
EURO STOXX 50: DOWN 0.4 percent at 3,468.45 (close)
Tokyo – Nikkei 225: UP 0.5 percent at 22,614.25 (close)
Hong Kong – Hang Seng: UP 0.9 percent at 28,920.90 (close)
Shanghai – Composite: DOWN 0.1 percent at 2,903.65 (close)
Euro/dollar: UP at $1.1729 from $1.1687 at 2100 GMT
Pound/dollar: UP at $1.3193 at $1.3145
Dollar/yen: DOWN at 110.98 yen from 111.20 yen
Oil – Brent Crude: UP 49 cents at $73.93 per barrel
Oil – West Texas Intermediate: UP 78 cents at $69.30 per barrel
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