According to pre-market data, the Dow Jones is expected to open with a 41-point surge as Dow Futures indicate a 63-point climb, contributing to overall global stock market recovery.
The change in sentiment around the Dow Jones and the rest of the U.S. stock market comes after an upsurge in trade deal optimism ahead of the new round of trade talks.
Hu Xijin, the editor-in-chief of Chinese and English editions of the Global Times considered to be an insider journalist covering the trade talks, said that China is preparing to introduce measures to “lessen the negative impact of the trade war” for both Chinese and U.S. companies.
Based on what I know, China will introduce important measures to ease the negative impact of the trade war. The measures will benefit some companies from both China and the US.
General optimism towards trade deal is affecting Dow Jones sentiment
Since September 4, the Dow Jones has climbed by nearly 800 points from 26,118 points to 26,909 points as other major stock market indices such as Nikkei 225 and the SSE Composite also showed signs of recovery.
With the European Central Bank (ECB) expected to introduce a new wave of stimuli to improve the current state of the eurozone economy and the yield of the 10-year treasury of the U.S. on the decline, strategists have started to foresee a brighter short term trend for the global stock market.
If China and the U.S. both move towards preventing the slowdown of their respective economies and the global stock market through various measures, geopolitical risks affecting the markets are likely to decline, lessening the pressure on the Dow Jones.
“Based on what I know, China will introduce important measures to ease the negative impact of the trade war. The measures will benefit some companies from both China and the US,” said Xijin.
Xijin also noted that while the economy of China has slowed down, the U.S. still has enough incentive to gear towards a deal to alleviate some of the pressure on its economy and the stock market.
“China’s economy is slowing down, but it’s still on path going forward. Massive infrastructural construction is continuing, people’s livelihood is advancing. American economy is idling, with exuberance supported by bubble. It is Washington that is nervous.”
Most of the progress in the trade talks between the U.S. and China are said to have been priced into the markets. But, significant progress in the trade talks in the short term during a phase in which the Dow Jones is sustaining one of the strongest extended rallies in recent years could boost the sentiment around the stock market.
Yardeni Research president Ed Yardeni also noted that central banks continuing to push forward plans to ease monetary policies to stimulate growth could enable the global stock market to sustain its momentum throughout the year’s end.
:“The major central banks are providing yet another round of monetary easing. They are doing their best to stimulate their economies and boost inflation closer to their 2.0% targets. However, their ultra-easy monetary policies haven’t worked as expected, so they keep doing more of the same.”