Hope for U.S.-China trade deal sends stocks higher

Stocks are poised to move higher on Friday after President Donald Trump said he spoke with China’s Xi Jinping and that discussions are “moving along nicely,” boosting Wall Street’s hopes the two economic powers may resolve their trade dispute. 

Futures contracts for the Dow Jones Industrial Average rose more than 300 points before the stock market begins trading at 9:30 a.m. E.T., while futures for the S&P 500 and Nasdaq indexes also pointed to gains. Global stocks rose on hopes of a trade deal, with markets in Europe and Asia gaining ground. Hong Kong’s Hang Seng index jumped 4.2 percent, while the Shanghai Composite index added 2.7 percent.

Mr. Trump has asked U.S. officials to start drafting potential terms for a new trade agreement with China, with the president aiming to reach a new pact while at the Group of 20 nations summit in Argentina later in November, reports Bloomberg News. Trade tensions have weighed on investor sentiment because the Trump administration’s tariffs on Chinese imports sparked companies to disclose how much the import duties could hurt them, said Liz Ann Sonders, chief investment strategist for Charles Schwab.

 “Companies are saying ‘this is biting and here’s how,'” she said. “They’re starting to talk about profit margins and whether they’re going to pass the expenses onto consumers.”

Mr. Trump didn’t give details about his discussions with Xi, but there have been few signs of movement in the trade dispute in recent months, and investors are getting nervous about the prospect of huge tariff increases.

A Chinese foreign ministry spokesman told reporters the discussion was positive and that the two leaders were optimistic about resolving the dispute over technology that has resulted in both sides imposing penalty tariffs on billions of dollars’ worth of each other’s exports. Meanwhile, Chinese state media said Xi has promised tax cuts and other help to China’s entrepreneurs in a renewed effort to revive the cooling, state-dominated economy.

Not so fast: Continuing turmoil?

Yet until there’s clarity on a trade deal, investors may continue to fret, noted CityIndex analyst Fiona Cincotta. 

“A formal meeting between Trump and his Chinese counterpart will take place later this month at the G-20 summit and is likely to inject volatility into trading until the two sides reach a formal resolution over trade issues,” she wrote in a research note. 

A market gain on Friday would aid a gradual rebound from a plunge that lasted almost the entire month of October. Many of the biggest gains Thursday came from stocks that struggled badly last month like chipmakers and other technology companies and smaller, domestically-focused companies.

October brought a sudden, screeching halt to a milestone-setting September and snapped a six-month winning streak for the benchmark S&P 500 index. Last month clocked in as the worst month for the market since September 2011.

Investors may be on their toes until the trade dispute is resolved. Mr. Trump “has been known to blow hot and cold before and during major negotiations and a positive comment today could easily turn into a less than flattering one tomorrow,” Cincotta noted.