Stocks fell at the end of a choppy session Monday as investors continued to mull prospects of an at least temporary trade agreement.
Earlier, stocks had been lower after a report that Beijing was seeking more talks before signing a preliminary trade deal trounced optimism over slackening tensions between the U.S. and China.
However, a Twitter post mid-morning from Hu Xijin, editor in chief of the Chinese state-run Global Times media outlet, asserting that the U.S. and China made a “breakthrough last week” and “have the strong will to reach a final deal” helped lift risk assets off their lows of the session.
Here’s where the markets settled Monday:
S&P 500 (^GSPC): -0.14%, or 4.08 points
Dow (^DJI): -0.11%, or 29.51 points
Nasdaq (^IXIC): -0.1%, or 8.39 points
Crude oil (CL=F): -2% to $53.59 per barrel
Gold (GC=F): +0.49% to $1,496.00 per ounce
China is looking to meet to work out more details of the “phase one” trade deal President Donald Trump presented late last week, Bloomberg reported Monday, citing unnamed people familiar with the matter. China reportedly wants the Trump administration to do away with a planned tariff hike in December, on top of its existing plan to scrap a tariff increase previously scheduled to take place Tuesday.
Treasury Secretary Steven Mnuchin told CNBC that he expects the tariff increase will take effect in December if no deal materializes between the two countries.
“But I expect we’ll have a deal,” Mnuchin said on CNBC.
The Bloomberg report undermines investors’ hopes that Trump’s “substantial phase one deal” would be codified in writing soon. Trump said previously that the deal would take between three to five weeks to write and could be signed before November’s Asia-Pacific Economic Cooperation summit in Chile.
Many economists, however, had doubted the credibility of the partial trade deal to begin with, noting both sides’ history of flip-flopping whenever new headway appeared to have been made. Plus, deeper structural sticking points remain between the U.S. and China, which won’t be easily resolved with temporary solutions.
“The fact that the talks shifted towards a ‘first phase’ covering narrow issues around trade only reveals how difficult the deeper issues around intellectual property, technology transfer and industrial strategy will be to resolve,” Neil Shearing, chief economist for Capital Economics, wrote in a note. “As things stand there is no obvious path to a ‘phase two’ deal covering these broader concerns.’”
China’s economy – the second largest in the world – has continued to weaken in the face of ongoing trade tensions. China’s imports fell 8.5% in September, marking a ninth decline over the past 10 readings and reflecting weakening import demand trends for the country. Exports also declined, falling 3.2% in September from the year prior. Both imports and exports fell more-than-expected for the month.
Taken together, China’s trade surplus grew 14% over last year to $39.65 billion in September.
The country’s trade surplus with the U.S., however, narrowed slightly on a monthly basis to $25.88 billion in September, from $26.96 billion in August. But imports from the U.S. fell 16% over last year in September, and exports to the U.S. declined nearly 22%.
The U.S. economic release calendar remains light Monday, and the credit market is closed in observance of Columbus Day. Third-quarter corporate earnings results are set to pick up Tuesday, headlined by big banks including Citi (C), Goldman Sachs (GS), JPMorgan Chase (JPM) and Wells Fargo (WFC).
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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