It’s an up-and-down day on Wall Street as investors try to parse conflicting news about progress toward resolving the trade war with China.
Shares rose modestly in response to what appeared to be good news on the U.S.-China trade war, only to fall back to near the break-even line. News that the European Central Bank cut interest rates and plans a bond-buying program moved markets as well.
A Bloomberg report that said the U.S. was considering an “interim” trade agreement with China sent the Dow Jones Industrial Average and S&P 500 higher, but the gain quickly faded after CNBC reported that a White House official said the Trump administration is “absolutely not” considering such a deal.
The news came after Wall Street Journal reported that Beijing was looking to narrow the scope of trade talks, putting some national-security issues on a separate track. On Thursday, President Donald Trump said the U.S. would delay increasing some tariffs on imports from China for two weeks as a good-will gesture.
The Dow was up 0.2% in late morning, while the S&P 500 had gained 0.3%.
Earlier Thursday, the European Central Bank moved to prop up economic growth, which has been hit by the trade war, among other factors. The bank said it would cut its policy deposit rate by 10 basis points, or hundredths of a percentage point, to -0.5%. It also said it would start buying €20 billion ($21.9 billion) of bonds monthly, starting Nov. 1. And notably, the central bank said it expects that program “to run for as long as necessary to reinforce the accommodative impact of its policy rates.”
Global bond yields briefly dropped after the ECB’s announcement, and the euro temporarily fell against the dollar. Those moves were short-lived, however.
Yields in the U.S. and Germany erased most of their declines on the speculation that the U.S. and China were nearing a trade deal. Data also showed stronger-than-expected U.S. inflation in August. Consumer prices rose 2.4% from the prior year, excluding volatile food and energy costs., the quickest pace since July 2018.
The inflation reading provided additional evidence that the U.S. economy remains strong compared with the rest of the world. The Federal Reserve is still widely expected to cut interest rates by 25 basis points, or hundredths of a percentage point, next week, but the report raised questions about the longer-term outlook for U.S. monetary policy. Even so, the euro erased its decline against the dollar in the hours after the ECB’s news.
Strategists cast doubt on how much central-bank policy could achieve to spur on further growth in the eurozone.
“Despite all market excitement now, the question remains whether this will be enough to get growth and inflation back on track as the real elephant in the room is fiscal policy,” wrote Carsten Brzeski, chief economist at ING. “It is clear that without fiscal stimulus, Draghi’s final stunt will not necessarily lead to a happy end.”
Draghi agreed with ING’s view that the responsibility should shift to lawmakers.
“Fiscal policy should become the main instrument” to promote economic growth, he said. “There was complete agreement about that.”
Never one to miss an opportunity to bash the U.S. Federal Reserve, Trump complained on Twitter that the ECB is “acting quickly” to devalue the euro, while the “Fed sits, and sits, and sits.”
Corrections & Amplifications: The U.S. 10-year yield fell to 1.7%. An earlier version of this article said it fell to 2.9%.
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