I`m a New York-based journalist who talks about billionaires and their wealth for Forbes. Previously, I worked on Forbes` Breaking News team, which dealt with money and markets. Topline: Although the U.S. and China have finally agreed on a first deal to defuse the 19-month trade war and result in a withdrawal of existing and planned tariffs, the stock market has not risen in the news. Instead, markets ended the day largely flat: the S&P 500 ended the day up less than 0.008%, while the Dow Jones Industrial Average rose 0.012%. The “Phase 1” trade deal between the U.S. and China offers a lot to distinguish for trade observers, but there is an important development for investors: no new tariffs and a removal of some existing tariffs. This is enough to put a little pressure on the global economy and revive stock markets for now. Here`s why, according to market experts, stocks didn`t make progress in Friday`s trade news: The consequences of regional trade agreements (SAAs) on countries` well-being are controversial. In this paper, we assess these effects based on stock market returns from a recent data set that spans 200 ATR announcements, 80 economies, and 20 years. We measure the impact of ATR messages on domestic equity market returns after adjusting these returns to international stock market movements. We then link these abnormal returns to the characteristics of RTA members and the agreements themselves.
We find strong evidence of the natural trading partner hypothesis; Equity markets rise more sharply when ASAs are signed between countries that already have a high trading volume. Stock markets also rise more sharply when poorer countries sign IFIs and ASAs are signed with smaller partners. Nor do we find evidence that capital markets expect significant effects from trade diversion. While global markets have been expecting some sort of limited deal for some time, the pact, along with the U.S.-Mexico-Canada deal, which is approaching the finish line, gives “an urgent boost” to global business confidence, Nicholas Colas, co-founder of DataTrek Research, said in a statement to clients. Setbacks are likely, but bilateral agreements should be enough “to keep alive hopes of economic growth and corporate earnings growth in 2020 and limit fears that a new wiring of global trade agreements could plunge the world into recession in the near future.” This should push stock prices higher in the coming weeks, since, according to Colas, companies that close the 2020 budgets are starting to consider incremental investments. .