S&P 500 Opened High After US & China Put Trade War On Hold
By: Eddy Peng May 21, 2018
U.S. equity market opened high on Monday morning, coming after U.S. and China reached an agreement on trade issues on Saturday. The Trump administration won’t impose tariffs on Chinese products for now, which was set on as much as $150 billion to punish Beijing for allegedly violating American intellectual property and unfair trade practice.
The U.S. trade war with China is “on hold” after the world’s largest economies agreed to drop their tariff threats while they work on a wider trade agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday. His remarks will be a relief to investors, who had feared the world’s two biggest economies were on the brink of a trade war, which tends to undermine the broadest global upswing in years.
In the joint statement, China proposed to significantly increase purchases of U.S. goods and services, especially from farm and energy sessions. Here, U.S. corporates from those sessions will probably gain more profits from more exports to China, resulting in higher stock prices in return.
Recent fall in U.S. 10-year Treasury Yield from the top at 3.12% will likely boost the stock market for the short term, but its high level standing over 3% would undermine stock market’s performance for the mid- and long-term period.
The S&P 500 index opened high as much as 0.7 percent compared with the previous close. Although the relieved trade tension is good for driving the market up, 61.8% Fibonacci retracement is standing ahead of the current position, showed by the daily chart. A successful breakout later will expose another resistance placed by the upper channel line, which has been holding on since late March.
According to RSI(7) and Stochastic oscillator, they are now showing a reversal from downtrend, suggesting a further rise in prices in weekly outlook.
Chart 1: S&P500 Daily
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