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US open: Dow surges past 29,200 as trade deal boosts sentiment

By Iain Gilbert

Date: Thursday 16 Jan 2020

US open: Dow surges past 29,200 as trade deal boosts sentiment

(Sharecast News) - Wall Street stocks recorded some early gains on Thursday after the US and China signed their "phase one" trade agreement during the previous session.
As of 1545 GMT, the Dow Jones Industrial Average was up 0.62% at 29,211.12, while the S&P 500 was 0.53% firmer at 3,306.83 and the Nasdaq Composite started out the session 0.75% higher at 9,327.76.

The Dow opened 180.90 points stronger on Thursday after closing with a new record high of 29,030.22 in the previous session as investors cheered the signing of the trade deal between the world's two largest economies.

Under the agreement, Beijing will buy an additional $200.0bn worth of US goods over the next two years, meaning US exports to China should, in theory, rise to $263.0bn in 2020 and $309.0bn in 2021 - marking a record-breaking acceleration of US exports to China.

Vice Premier Liu He said China's other suppliers of agricultural commodities would not be impacted by the Sino-US trade deal since buying will be based on market principles, according to a state-owned outlet CCTV.

However, some analysts still believe that additional tariffs may still be slapped on Beijing despite the signing and have cautioned that there was still a very real threat that trade uncertainties could develop elsewhere, including in Europe.

Oanda's Craig Erlam said: "There's relief at the situation progressing in a positive way that removes some uncertainty but disappointment at the same time that tariffs remain in place and will for the foreseeable future.

"Thankfully, earnings season will provide a handy distraction and may give investors reason to feel cheerful and bullish, even at these levels. It's got off to a mixed start but I feel that may be the theme for much of the next few weeks."

Elsewhere, White House economic advisor Larry Kudlow revealed further tax cuts would take place in 2020.

In terms of data, the number of Americans filing for unemployment benefits unexpectedly fell last week, according to figures released by the Labor Department on Thursday.

Jobless claims were down 10,000 from the previous week's unrevised level to 204,000. Economists had been expecting an uptick to 216,000. Claims were down for the fifth week in a row.

Elsewhere, retail sales in the US grew more quickly than expected last month, although according to some economists, the details of the report pointed to household spending coming off the boil.

According to the Department of Commerce, in seasonally adjusted terms, US retail sales volumes increased at a month-on-month pace of 0.3% in December to reach $529.6bn (consensus: 0.2%).

Meanwhile, a key lead indicator for the US manufacturing sector got off to a flying start in 2019, although the details of the survey were perhaps not quite as strong as they appeared to be at first glance.

The Federal Reserve Bank of Philadelphia's factory sector index jumped from a reading of 2.4 for November to 17.0 in December. Economists had forecast a reading of 3.4 for the gauge which tracks manufacturing activity in America's mid-Atlantic region.

Still on data, US business inventories fell more than they had in the last two and a half years in November - as sales rebounded, suggesting inventory investment could be a drag on economic growth in the fourth quarter.

The Commerce Department revealed on Thursday that business inventories dropped 0.2% - the biggest decline since April 2017, after edging up 0.1% in October.

Lastly, the National Association of Home Builders/Wells Fargo Housing Market Index settled back a bit after its five-point surge in December took it to its highest level since 1999. The index, which measures builder confidence in the market for newly constructed homes, dipped one point in January to 75.

On the corporate front, Morgan Stanley shares were up 7.16% following its latest quarterly figures, while Bank of New York Mellon slid 7.24% after the release of its figures.

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