Dow Jones futures launched a triple-digit rally in early trading on Wednesday as Treasury Secretary Steven Mnuchin said the China trade deal is 90 percent complete.
Speaking to CNBC, Mnuchin confirmed that Trump and Xi Jinping were inching closer to a resolution with their G20 meeting just days away. After back-to-back losses on the stock market, the Dow looks set to open higher at the bell.
“We were about 90% of the way there (with a deal) and I think there’s a path to complete this” – Treasury Secretary Steven Mnuchin.
Dow sparks triple-digit rally
Dow Jones Industrial Average (DJIA) futures leapt 122 points higher (0.46 percent) on Wednesday after a two-day bruising on the stock market. At 6.22 am, the Dow hovered at 26,684 just short of its all time high.
S&P 500 futures jumped 14.5 points (0.5 percent) to 2,936.50 while Nasdaq Composite futures charged almost 1 percent higher to hit 7,689.
US-China trade deal: stock market catalyst?
As warning signs flash across the stock market, traders have pinned their hopes on a trade deal resolution. As Brian Kelly explained this week:
“If we get some movement, and it would have to be significant, at the G20 towards some kind of truce on this trade war, then you could actually see the market hit new highs.”
It seems Kelly may get what he wished for. While a trade deal agreement at Saturday’s G20 meeting is unlikely, Mnuchin is optimistic that Trump and Xi will make progress in the deadlocked talks. He sees the two super-powers inking a deal by the end of the year.
“I’m hopeful that we can move forward with a plan … President Trump and President Xi have a very close working relationship. We had a productive meeting at the last G-20.”
Dow pins hopes on Trump and Xi
As CCN reported yesterday, Federal Reserve chairman Jerome Powell struck a gloomy tone on the US economy. He noted that trade war tensions had stalled growth and triggered the Fed to move towards a more dovish policy.
Wall Street traders are increasingly building defensive portfolios to brace for the fallout. $222 billion wealth management firm Pictet has doubled its cash holdings and sold stocks in preparation. Meanwhile, non-correlated assets like gold and bitcoin are shooting to yearly highs.
Mnuchin hasn’t said anything new.
The 90% headline was the same as in April.
It has nothing to do with probability of deal completion.
But instantaneously the global valuation scheme changes.#theartofjawboning pic.twitter.com/BR4zz2QGLS— Sven Henrich (@NorthmanTrader) June 26, 2019
Trade deal 90% done? We’ve heard this before
While Mnuchin’s comments are promising, this is not news. The Financial Times reported back in April that a US-China trade deal was 90% done. Unfortunately, the last 10 percent is the hardest to negotiate.
“Ninety percent of the deal is done, but the last 10% is the hardest part, it’s the trickiest part and it will require trade-offs on both sides” – Myron Brilliant, US Chamber of Commerce.
There are still major sticking points for Trump and Xi and it remains to be seen if they can hash out the differences in Osaka, Japan on Saturday.
Click here for a real-time Dow Jones Industrial Average (DJIA) price chart.