US stock market hits record high as Donald Trump gives trade deal hint - as it happened

Graeme Wearden

from Economics | The Guardian on 2019-10-28 20:15 (#4T9NW)

S&P 100 climbs to new highs as US president suggests that 'Phase One' deal with China could be signed next month

Earlier:

8.15pm GMT

And finally.... America's S&P 500 index has closed at a new all-time high.

7.25pm GMT

With roughly 30 minutes until the closing bell, the S&P 500 is still striding to a record closing high.

The index is 0.6% higher today, up 18.35 points at 3,040.

This morning, the S&P 500 hit a record high as the #economy continues to grow thanks to pro-growth policies like the Tax Cuts and Jobs Act! https://t.co/s8xcLLfVZZ

7.19pm GMT

Stephen Massocca, senior vice president at Wedbush Securities in San Francisco, also believes investors are feeling less anxious:

"It just seems like the things that would disrupt the rally- tightening monetary policy - off the table. Some kind of big battle with the Chinese seems to be off the table, some kind of political upheaval seems be off the table.

"All of that means the line of least resistance is higher."

6.43pm GMT

Big Tech is playing a key role in the stock market rally, points out Caroline Hyde of Bloomberg:

The S&P500 is at a record high, and so too is its 3 biggest players...Microsoft, Apple, Alphabet... pic.twitter.com/xs91uPRsUH

6.35pm GMT

Wall Street seems to have learned to stop worrying about recessions, trade wars and Brexit - at least for the moment.

Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin explains (via Reuters).

"Most of the things that have been worrying markets haven't necessarily been resolved but the concern about them has waned a little bit.

"In general, it is more of a lack of bad news than it is an abundance of good news."

6.09pm GMT

Here's our news story on the big stock market float of the day:

6.01pm GMT

5.58pm GMT

Over in Frankfurt, Mario Draghi has signed off from the European Central Bank with a call for close fiscal union.

Draghi, whose term ends on Thursday, told his leaving party that monetary union needs to be strengthened (to avoid a repeat of the crises that erupted during his tenure).

The road towards a fiscal capacity will most likely be a long one. History shows that budgets have rarely been created for the general purpose of stabilisation, but rather to deliver specific goals in the public interest. In the US, it was the need to overcome the Great Depression that led to the expansion of the federal budget in the 1930s. Perhaps, for Europe, it will require an urgent cause such as mitigating climate change to bring about such collective focus.

Whichever path is taken, it is plain to see that now is the time for more Europe, not less. I mean this not in an axiomatic way, but in the truest traditions of federalism. Where results can best be delivered by national policies, let it stay that way. But where we can only deliver on the legitimate concerns of the public by working together, we need Europe to be stronger.

Draghi farewell: "The euro is an eminently political project, a fundamental step towards the goal of greater political integration, which found its economic justification in the parlous state of European economies in the mid-1980s." A contract of trust on managing interdependence https://t.co/XgokvP7qpx

5.35pm GMT

The US Dow Jones industrial average is moving towards its own record high today.

The benchmark index is up 87 points or 0.3% at 27,045, on hopes of a US-China trade deal (phase one) being inked next month.

4.53pm GMT

After a busy morning on Wall Street, the S&P 500 is firmly on track for a record closing high.

4.48pm GMT

European stock markets have closed higher, taking a lift from the rally in New York.

Stocks vulnerable to the trade war, such as industrial firms (including car makers) and tech companies led the rally.

4.16pm GMT

Brexit relief is also pushing stock markets higher.

David Madden of CMC Markets in London says the EU's decision to offer a flextension up to 31 January 2020 has cheered the City:

Stocks are higher today on the back of the news that Brexit has been delayed until potentially the end of January 2020. The extension was granted this morning, and even though it wasn't a surprise that Brussels agreed to the three month delay, the confirmation encouraged some buying.

The focus will now be on UK politics. Prime Minister Johnson is hoping for a general election in mid-December. Mr Johnson will need the support of two thirds of MPs in order to press ahead with the pre-Christmas election. The Conservatives are doing well in the opinion polls which is why Boris is keen for an election. Jeremy Corbyn claims he will won't support an election until the no-deal option is removed, but the Labour Party are performing poorly in the polls, and that's the real reason why they don't want an election in December

4.04pm GMT

Shares in Fitbit, the exercise-tracking tech firm, have surged 27%, following reports that Alphabet, Google's parent company, is in takeover talks.

3.59pm GMT

Expectations of a cut to US interest rates on Wednesday are also lifting shares today.

Marie Owens Thomsen of Indosuez explains that a cut - the third this year - is heavily priced in:

The markets are pricing a 91% probability (Bloomberg) of a rate cut.

The Fed under Jerome Powell appears to be more reluctant to risk surprising the markets than past Feds, and therefore the chance for a move this week is significant. Data of course cuts both ways in a slowing economy. A 3.5% unemployment rate clearly does not warrant a rate cut, although high policy uncertainty (323.2 in September, down from 350.8 in August), and slipping inflation expectations arguably do.

3.24pm GMT

A couple of photos from the floor of the New York stock exchange today:

2.46pm GMT

Here's a neat summary of the markets today, from Bloomberg:

U.S. stocks reclaimed an all-time high after three months, with the final leg coming on rising optimism for a trade deal with China. Treasuries slumped at the start of a a week packed with earnings and the Federal Reserve's policy decision.

The S&P 500 took out its July record after President Donald Trump said the U.S. is ahead of schedule to sign part of the trade deal. Microsoft jumped after winning a Pentagon contract, while AT&T climbed following a board shuffle. Tiffany surged after LVMH said it held discussions with the jeweler. PG&E plunged on liability risk from California wildfires.

Markets are https://t.co/M38UVbq7sm pic.twitter.com/n2QTGAtsRe

2.28pm GMT

Neil Wilson of Markets.com says investors are feeling more upbeat and piling into riskier assets such as equities.

It's a remarkable achievement against faltering corporate earnings, a festering (if not quite total) trade war, and softer macro data everywhere you look. Bulls had tried their hardest Friday but some really positive noises on trade nudged us over the line today.

President Trump said the US and China are looking to be ahead of schedule on sign the 'phase one' trade deal at the APEC meeting in Chile in mid-Nov. The bar on a US-China trade deal had been set so low that the market seems content with this pretty puny agreement. At least the direction is positive.

2.25pm GMT

If you're just tuning in...

Today's rally on Wall Street was sparked by optimistic comments on the US-China trade war from both sides.

2.12pm GMT

The S&P 500 is scrambling boldly into new heights, now up 19 points at 3,041 for the first time ever.

Virtually every sector is up, led by telecoms (+2.6%), technology (+0.9%), healthcare (+0.8%) and basic materials (+0.8%).

1.55pm GMT

Mihir Kapadia, the CEO of Sun Global Investments, says talk of a Phase One trade deal between the US and China has pushed shares to record levels.

Positive sentiment was boosted by the Office of the U.S. Trade Representatives stating that the administration is close to finalizing some sections of the "phase one" agreement with China.

3Q earnings have also boosted the market, driving the Tech sector to outperform the rest of the SPX on strength in the semis group. Tech shares were up (+ 1.2% on Friday), followed by Materials (+1.04%) and Energy, as trade optimism and constructive fundamentals propped up oil and base metals prices.

1.47pm GMT

Sir Richard Branson had a great view of today's record high.

He's is on the floor of the New York stock exchange for the flotation of Virgin Galactic.

1.42pm GMT

The S&P 500 has now risen by 21% this year.

1.38pm GMT

The Nasdaq 100 index of large technology companies has also hit a record high.

1.36pm GMT

BOOM! The S&P 500 index of US companies listed in New York has opened at a new all-time high.

The S&P 500 gained 15 points or 0.4% to hit 3,038 points, a new record level.

1.27pm GMT

Donald Trump also told reporters that he hopes to sign the deal with China's President Xi Jinping at the Asia-Pacific Economic Cooperation forum in Chile next month.

The U.S. president said the phase one portion would "take
care of the farmers" and "also take care of a lot of the banking
needs," adding:

"So we're about I would say a little bit ahead of schedule maybe a lot ahead of schedule".

1.00pm GMT

Boom! Donald Trump has just predicted that he will sign a preliminary trade deal with China soon.

That's a loud hint that the deal could be signed off at next month's meeting of Asia-Pacific world leaders. It makes sense, given the reports of progress from Beijing and Washington in recent days.

U.S. President Donald Trump said on Monday he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing.

"We are looking probably to be ahead of schedule to sign a very big portion of the China deal, we'll call it Phase One but it's a very big portion," he told reporters at Joint Base Andrews before leaving on a visit to Chicago

12.53pm GMT

We all know there's a gender pay gap problem, but the full scale of the financial hit suffered by women over their careers is pretty shocking.

The Office for National Statistics figures revealed huge inequality between men and women even at the highest levels of educational attainment. It said women with a master's or PhD degree still made one-third less over their lifetimes than men with the same qualifications.

"Women aged 26 to 35 years with higher degrees have average lifetime earnings of 803,000, whereas men of the same age with undergraduate level qualifications have average lifetime earnings of around 1,160,000," said the ONS.

12.45pm GMT

Here's our updated story on the Tiffany takeover tussle:

12.43pm GMT

Jewellery chain Tiffany has confirmed that rival luxury chain LVMH has tabled a takeover bid.

Tiffany & Co says its board of directors were "carefully reviewing the proposal" and advised shareholders not to take action at this point in time.

12.30pm GMT

Over in New York, traders are speculating that the S&P 500 index could hit a new record high today.

Stocks are up in the futures market, following encouraging noises on a trade deal from China and the US over the weekend (see earlier post).

US Opening Calls:#DOW 27045 +0.34%#SPX 3030 +0.26%#NASDAQ 8057 +0.37%#RUSSELL 1562 +0.27%#FANG 2706 +0.38%#IGOpeningCall

Today marks the start of a new era for the human spaceflight industry. @VirginGalactic will begin trading on the @NYSE under the ticker 'SPCE.' For the first time, anyone will have the chance to invest in a human spaceflight company https://t.co/vp1xg4Z2Fm pic.twitter.com/pJ3fXyXqlc

12.04pm GMT

The prospect of another Brexit extension will irk some UK companies, as they stare at massive stockpiles of raw materials, parts and finished goods.

Bosses now have to decide whether to whittle these supplies down, or maintain them in case Britain crashes out of the EU on 31 January (the new deadline agreed by EU leaders today).

While there is relief that the disruption of a no-deal exit on 31 October is off the table, further delay prolongs uncertainty. Businesses will be wondering what to do with partially implemented restructuring, stockpiles and logistics plans. With the added stepping stone of a possible election in the coming weeks, planning for the future could be even harder.

"While preparedness levels vary, business has generally listened to the clear government messaging to get ready for Brexit on 31 October. With the prospect of preparing for a fourth deadline, there's a feeling of extension exhaustion.

11.52am GMT

The CBI's retail sales survey shows that UK consumers are notably cautious, says Howard Archer of the EY Item Club

Her's his take:

11.15am GMT

Here's are the key findings from the CBI's monthly healthcheck

11.13am GMT

These tweets from the CBI show how stockpiling has spiked, even as sales have weakened.

Stocks in relation to expected sales jumped to a survey record in October with wholesale stocks also spiking. Anecdote suggests that the proximity of the Brexit deadline to Christmas is leading to further stockbuilding in both sectors #DTS https://t.co/FuyEbQnoxF pic.twitter.com/2gYzVW6ksk

These issues come at a difficult time for retailers, who saw their sixth consecutive month of falling annual sales in October. This is now the longest run of falling sales since the financial crisis. #DTS https://t.co/FuyEbQnoxF pic.twitter.com/ArCNFSGtuS

11.09am GMT

Breaking: Stockpiling by UK retailers has hit a record level.

The latest survey of Britain's retail industry, conducted by the CBI, shows that shops brace for Brexit disruption and the peak Christmas shopping season.

"Retailers have now endured six months of falling sales, the longest period of decline since the financial crisis. The sector is struggling with ongoing digital disruption, layered on top of cost pressures from a weak pound and the cumulative burden of an outdated business rates regime.

"Retailers have also had to contend with the looming Brexit deadline, which has partly driven a record spike in stocks. The timing could not be worse: the run-up to Christmas is a crucial time of year for the retail sector, and not knowing where we will be on November 1st is adding more strain to an already beleaguered sector."

10.59am GMT

Asia-Pacific stock markets have all closed higher, with Japan touching a one-year peak, amid the trade war optimism.

APAC Closing Prices:#ASX 6740.7 +0.02%#NIKKEI 22867.27 +0.30%#HSI 26891.26 +0.84%#HSHARES 10569.82 +0.99%#CSI300 3926.58 +0.76%

With indications that the U.S. and China are making more progress in tariff discussions, sentiment continues to turn more favourable.

10.53am GMT

In New York, shares in Microsoft are rallying in pre-market trading after it won a $10bn contract to provide cloud computing services for the Pentagon late last week.

But Amazon, who were favourite to claim the contract, are down in pre-market trading -- having already said it was "surprised about this conclusion".

The morning after Microsoft wins $10 billion cloud computing contract over Amazon $MSFT $AMZN pic.twitter.com/gDSmDRXjuN

10.35am GMT

The European Central Bank are throwing a farewell party for Mario Draghi this afternoon, before he steps down as president on 31 October.

But the latest money supply figures, released this morning, have put a dampener on celebrations.

The annual growth rate of broad money (M3) in the euro area decreased to 5.5% in September 2019 from 5.8% in August (revised from 5.7%). Full press release https://t.co/WuZPiYa8r7 pic.twitter.com/XKwfC97EwE

Bad news for the Euro area and ECB economy as the growth rate of narrow money ( M1) falls from 8.5% to 7.9% in September #GDP

10.02am GMT

Eric Moore, fund manager of FP Miton Income Fund, agrees that the US-China trade war has hurt HSBC, helping to push profits down.

He writes:

"There is not much to like in HSBC's Q3 numbers today.

Reported revenues are down 3%, whilst operating expenses are up 2%. The knock-on impact on profits has been severe with reported pre-tax profit down 18%. This runs counter to HSBC's recent mantra of having "positive jaws", that is to say their intention to have revenues growing faster than costs. This is plainly easier when the top line is growing, as there is a certain level of inflation embedded in their cost base. But with interest rates very low everywhere and yield curves very flat it is hard for all banks to deliver revenue growth.

9.47am GMT

Why the pound isn't higher ->

GBPUSD firming a touch but extension was expected and now means election risk. pic.twitter.com/ait56WV6rs

9.34am GMT

Breaking: European Union leaders have granted the UK a Brexit 'flextension'.

This gives parliament until 31 January to agree a deal to leave the EU.

The EU27 has agreed that it will accept the UK's request for a #Brexit flextension until 31 January 2020. The decision is expected to be formalised through a written procedure.

#GBP +0.08% against other currencies#GBPUSD 1.28478 +0.11%#EURGBP 0.86382 +0.01%#GBPAUD 1.88282 +-0%#GBPJPY 139.692 +0.12%#GBPCAD 1.67951 +0.17%#GBPCHF 1.27842 +0.13%#GBPEUR 1.15766 -0.01% https://t.co/jMzQHeImR2

9.13am GMT

HSBC's travails has dragged the London stock exchange into the red in early trading.

The FTSE 100 inex has lost 16 points, or 0.2%, to 7,307. Last week it gained 2.5% in a rally partly driven by the softening pound.

9.02am GMT

Shares in HSBC have slumped by 4% this morning, after the banking giant issued disappointing financial results.

"Parts of our business, especially Asia, held up well in a challenging environment in the third quarter. However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US.

Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth. We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities."

Restructuring charges in the final part of the year are likely to hurt and will be in addition to the current fears of a global economic slowdown following on from the US/China trade spat, political turmoil in Hong Kong and general European economic malaise.

8.43am GMT

There's not much optimism in Hong Kong this morning.

After months of pro-democracy protests, the City state is expected to plunge into recession when the latest GDP figures are released on Thursday.

"The blow to our economy is comprehensive."

"It seems it will be extremely difficult for us to reach full-year economic growth of 0 to 1%. I would not rule out the possibility that the full-year economic growth will be negative."

8.37am GMT

Takeover news: French luxury group LVMH has confirmed it held talks with US rival Tiffany.

LVMH said it had held preliminary discussions with Tiffany, known for its diamond engagement rings, after reports said it had made a $14.5bn bid.

It stressed that there was no certainty that a deal would be agreed.

8.30am GMT

Shares in European car companies have hit their highest levels since May, supported by trade deal optimism.

8.26am GMT

Shares in Chinese tech companies are rocketing this morning, after president Xi Jinping said China intends to invest in blockchain technologies.

8.07am GMT

Trade war optimism has pushed Japan's Nikkei index to a one-year high today.

Investors piled into globally-focused companies, on hopes that a US-China trade deal would spur growth.

Lifting the mood were comments from U.S. and Chinese officials that they are "close to finalizing" some parts of a trade agreement after high-level telephone discussions on Friday.

Traders reacted quickly by buying shares perceived to be sensitive to global economic cycles, including semi-conductor chip-related shares and shipping firms.

Global stocks extend gains w/ Asia rises to 3mth high as risk assets got a fillip from hopes of a US-China trade deal as soon as next month & on expectations the Fed will continue to cut rates. Japan's Nikkei hits 1y high. Bonds lower w/10y bond yields at 1.82%. Bitcoin at $9.5k. pic.twitter.com/DWHGGZNPr0

7.41am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

As it stands today, the probability of a no-deal Brexit is very slim. From the market perspective, a no-deal scenario is almost fully reflected in sterling prices near the 1.30 mark against the US dollar.

Pound traders have further trimmed their net short positions during the week that ended on October 22nd and have already moved on to pricing Britain's next political challenges.

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