I think the market is rallying simply because the worst case scenario of US-China trade plummeting is off the table.
New York, United States (AFP) — Wall Street on Monday set records for a third straight day as investors absorbed a new US-China trade deal and Beijing released upbeat economic data.
US and Chinese officials on Friday announced a partial trade deal, with Washington cancelling and reducing tariffs in exchange for Chinese pledges to increase purchases of US exports and reform its trade practices.
All three main US stock indexes finished at records, joining the upward drift in Europe where Paris, London and Frankfurt all posted strong gains.
Chris Low of FTN Financial told AFP the markets’ jubilance may not be entirely justified.
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“The best you can say is that it eliminates some of the negative scenarios people were worried about,” he said.
“I think the market is rallying simply because the worst case scenario of US-China trade plummeting is off the table.”
Officials in Beijing released data showing China had had a better-than-expected pickup in the retail and industrial sectors in November, a spot of good news at the close of a difficult year for the world’s second-largest economy.
London’s FTSE 100 which benefitted from continued post-election optimism and a dip in the value of the pound.
In the eurozone, Frankfurt’s DAX 30 index climbed 0.9 percent to close just shy of a record high.
And the Paris CAC 40 won 1.2 percent, briefly breaching the 6,000 points level for the first time in 12 years.
The eurozone’s economy meanwhile remained at a near standstill in December, extending the worst quarterly performance since 2013, according to a closely-watched survey compiled by IHS Markit research group.
While the removal of uncertainty surrounding Brexit — following the Conservatives’ commanding victory in last week’s British elections — allowed markets to breathe a huge sigh of relief, analysts urged caution with the saga having some way to run.
“This is just the end of the beginning,” noted Quentin Fitzsimmons at T. Rowe Price.
“The real work of negotiating the UK’s future trading relationship with the EU lies ahead and that has the potential to become very complicated.”
