Global Stocks Mixed on Reports of Trade Deal Progress

Global stocks finished mixed on Monday following reports the United States and China were close to a major trade agreement that would roll back some of the tariffs imposed in recent months.

Asian bourses pushed higher, Europe was mixed and Wall Street retreated in a reaction that analysts said partly reflected the belief a trade deal had already been priced into the market. “We had a positive reaction on making progress on a trade deal the last couple of weeks,” said FTN Financial’s Chris Low. “Now that it is almost done, we are starting to talk about where the trade deal would not be so great. “We’ve probably already priced in the best news on that.”

Analysts said US stocks were also pressured by weak construction data and news that congressional Democrats are broadening their probe of President Donald Trump and his associates. But the US-China trade fight, which has dragged on for nearly a year, remained top of mind. Beijing and Washington have been edging closer to an agreement in recent weeks following regular talks.

Global stocks edge lower weighed by econ concerns, valuation issues, & as investors await word on trade talks w/China. China cut 2019 growth forecasts to 6-6.5% vs 6.5% prev. Italy bonds underperform after Bank of Italy Visco's comments, ECB money can't be used to buy govt bonds. pic.twitter.com/O74ds74zMx

— Holger Zschaepitz (@Schuldensuehner) March 5, 2019

Under an agreement taking shape, Beijing would lower some barriers on US companies’ operations in China and purchase large amounts American agricultural and energy goods if the United States lowered most of the tariffs in return. However, leading news reports said significant details remained unresolved.  “A more sustained ceasefire on tariffs will help to reduce business uncertainty,” noted Tai Hui, Asia-Pacific chief market strategist at JP Morgan Asset Management.

“This could provide a much-needed lift to business sentiment and improve growth momentum entering the summer,” he said. But others were more skeptical of the upside. “Even if a deal between the US and China on trade is ultimately agreed we don’t expect that a trade truce will now provide a substantial shot in the arm to the global economy,” said Niel Shearing at Capital Economics.

Focus turns Tuesday to the start of China’s annual National People’s Congress, where is to unveil the 2019 growth forecast, while dealers will be looking for any new economic stimulus measures. Also on Tuesday, the EU’s chief Brexit negotiator Michel Barnier is to meet Britain’s negotiating team, as both sides seek a breakthrough in the stalemated talks.

The meeting comes after Barnier said Saturday the European Union was ready to give Britain further guarantees to help push the troubled divorce deal through the British parliament.