• US stocks rise after the opening bell
  • Reports that US-China to restart talks to defuse trade war
  • Chicago PMI comes in better than expected

There’s been a sharp move higher for US indices shortly before the opening bell, with reports that the US and China are set to restart talks to defuse their trade war causing a flurry of buying.  The headline from Bloomberg also noted the following points:

  • US officials said to meet this week on China trade posture
  • Mnuchin and Liu He are having private conversations as they look for ways to reengage
  • There is an agreement among them that more talks need to take place

There was a pretty sharp jump higher on the news but it has been subsequently pared somewhat with the markets showing some strong selling on shorter time frames. If we look at the US100 the move is arguably most evident with a strong move higher being met with a pretty firm rejection after soaring more than 50 points in just under 20 minutes. 

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 The US100 jumped higher on the news and found more buyers on the Wall Street open but the market has failed to hold onto a large portion of these gains. Source: xStation

Given the volatile price action it is hard to tell whether this news will provide a lasting boost for stocks and mark a big turning point in the escalating trade tensions or whether it was just a knee jerk reaction. Tonight’s closing levels should provide a longer term picture and will reveal whether the reaction persisted or reversed. We earlier pointed out the significance of the 2800 level for the US500 and this remains an important line in the sand.  

On the data front the latest Chicago PMI has revealed a better than expected reading, coming in at 65.5 vs 62.0 expected. The prior was 64.1. Prices paid rose at a faster than previous pace and actually managed to tag their highest level in 10 years. This could be seen to be inflationary in nature, although the earlier miss on the PCE core is far more significant. 

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 The Chicago PMI beat forecasts to rise once more and came in at 65.5. Source: Bloomberg