Last week we saw the Dow Jones Industrial Average fall 2.93%, nearly 725 points. The blame was being placed on the threat of a global trade war. Well, yesterday the Dow made up for that steep dip in points, gaining over 650 points by the time the day closed. The jump marks the biggest one-day gain in the last two and a half years.
The reason for the sharp uptake in the market? Many are letting go of their fears of a global trade war as compromise and the possibly of mutually beneficial negotiations between the US and China are in the works.
"Today, nothing really worsened on the trade side of things and there was a little calm over the fact that the U.S. may be negotiating with the Chinese directly on these tariffs as opposed to imposing them," said John Zechner, chairman of investment firm J. Zechner Associates. "The whole worry in the market right now is the beginning of a trade war, so I think it's a bit of a relief rally."
However, the market is not out of the words yet, as the waters are still quite muddled on the tariff issue. Vice Premier Liu He, China's new economy czar, spoke with U.S. Treasury Secretary Steven Mnuchin on the phone and made very clear that Beijing was ready to defend itself in what seems to be a continuingly escalating tariff dispute.
"Markets are caught in conflicting currents. The trade tensions imperil growth," said Michael McCarthy of CMC Markets in a report. "Despite an extensive stream of tweets over the weekend President Trump declined to mention trade matters. This could be a sign that the threatened barriers are a negotiating position rather than a line in the sand."