US stocks rise on China trade hopes despite dire jobs report
US stocks have risen in early trading despite the worst unemployment report in modern history, as investors take cheer in the US and China’s agreement to work together on the smooth implementation of their trade deal.
The Dow Jones index was 1.5 per cent higher. The S&P 500 rose 1.3 per cent while the Nasdaq climbed 1.2 per cent.
European stocks have risen after China yesterday said its vice premier Liu He had talked by phone to US trade representative Robert Lighthizer and treasury secretary Steven Mnuchin.
With London trading closed for VE Day, the pan-European Stoxx 600 rose 0.8 per cent. Germany’s Dax was 1.2 per cent higher and France’s CAC was up 0.9 per cent.
US stocks also climbed as investors brushed off “nonfarm payrolls” data that showed 21m Americans lost their jobs in April. Unemployment surged to 15 per cent, its highest level since the Great Depression.
Investors were expecting an even worse figure, however. Weekly jobless claims data means the dire unemployment situation was well-known to markets.
“Wall Street did not learn anything new regarding the US labor situation,” said Edward Moya, senior market analyst at currency firm Oanda. “But one thing seems certain, price action is signaling that the majority of these job losses are expected to be short-lived.”
“Today’s stock market rally is mostly attributed to US-China trade negotiators pledging support for the phase-one trade deal,” Moya said.
US-China deal cooperation lifts US stocks
The “phase one” US-China trade deal was struck this year before coronavirus spread rapidly around the world. China agreed to ramp up purchases of US agricultural products in return for the lifting of tariffs.
However, coronavirus has thrown the deal into doubt. It has deeply damaged global trade and China’s ability to purchase US goods, but it has also increased tensions between the two countries.
Investors were spooked last week when US President Donald Trump raised the possibility of more tariffs against China.
Yet they were cheered yesterday and today by news of some progress over the deal. Liu and Lighthizer and Mnuchin agreed they would work together on achieving the goals of the trade deal this year.
The office of the US trade representative said both sides “agreed that in spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner”.
The dollar fell as investors bought equities today, slipping 0.2 per cent on an index against other currencies. The euro rose 0.1 per cent to $1.084.