Phase One of the U.S. and China trade deal is in the books, and so far, Wall Street seems happy over the early returns.
In midday Thursday trading (the announcement was made on Wednesday afternoon) the Dow Jones Industrial Average was up 166 points (0.6%) while the S&P 500 rose above the 3,300 level for the first time ever (up 0.6% for the day.) Technology stocks also fared well, with the Nasdaq Composite Index also rising by 0.6%, making it a trifecta for the three major U.S. stock market indices.
According to a White House statement, under a key component of the new agreement, China has pledged to increase imports of American goods and services by at least $200 billion.
“China’s increase in United States imports will take place over the next two years, and the trajectory is expected to continue even after 2021,” the White House states.
As well as the markets are faring in the afterglow of the announcement, the optics were just as impressive. Numerous pundits noted a highly theatrical aspect to the White House ceremony yesterday hosted by President Trump and attended by, as the president put it, a “who’s-who” of corporate glitterati.
Here’s a shortlist of the corporate chief executive officers – leaders of some of America’s most high profile companies – who attended the briefing, held in the east room of the White House.
- Nelson Pelts, CEO of Trian
- Jim Fitterling, CEO of Dow Chemical
Jamie Dimon, CEO of JPMorgan (JPM) - Get Report was not in attendance, but Mary Erodes, chief of JPMorgan's Wealth and Asset Management arm, was on hand. Additionally, Alan MacDonald, a key executive at Citi (C) - Get Report, stood in for CEO Michael Corbat.
Who Made Out on the Trade Deal?
Most, if not all, of the CEOs in attendance had good reason to be on hand for the China trade deal rollout. After all, their companies stood to benefit from the deal, which paves the way for more U.S. products to be exported to China, and its huge $5.6 trillion consumer market.
Here’s a snapshot of the companies who stand to make out big after the trade deal takes effect – with each company’s CEO (or high profile stand-in) in the East Room to slap backs and compare revenue projections as the president spoke.
Credit Card Companies
Under terms of the agreement, China promised it would not take more than 90 days to clear so-called electronic-payment services for use in the country’s consumer markets.
Bloomberg pegs the total value of the China payments market at $27 trillion and the country’s mobile payments alone make China the largest payments market in the world.
Now, without the traditional foot-dragging from China on green-lighting U.S. card providers access to Chinese consumers, companies like Visa and MasterCard can clear any application hurdles within a three-month waiting period and start operations much sooner than they could prior to the trade deal.
That alone gave Visa’s Kelly and MasterCard’s Banga a reason to share the limelight with President Trump, who called each CEO out by name, often suggesting they “thank” him for the opportunity for bigger profits from the deal.
Boeing, already the chief U.S. exporting company to China, and CEO Calhoun could see profits soar as a result of the new China trade deal. The aviation giant’s stock rose $2.40 on the first day of trading after the trade deal was announced, even as President Trump urged Calhoun to get going on the company’s grounded 737 Max Jet.
Trump noted that Boeing, on its own, represents a healthy chunk of the U.S. gross domestic product, and could theoretically add 0.5% to the nation’s GDP if it gets the 737 Max off the ground. “Get that going,” Trump stated at the trade deal announcement. “You’ll straighten that out quickly, please?”
Under Phase I of the new U.S. China trade deal, China will purchase $77 billion in manufactured goods from U.S. companies over the next two years. With its 50-year history operating in China, Boeing figures to be at the front of the line when China chooses its transaction partners.
Both Qualcomm (QCOM) - Get Report and Micron Technology (MU) - Get Report also stand to gain from the new China trade deal, as both already rank highly on the list of U.S. companies that held the biggest percentages of revenues coming out of China (2017 figures), with Qualcomm citing 69% of its revenues and Micron clocking in at 55%.
With the new trade deal firming up U.S. intellectual property issues long abused by Chinese companies and also expanding access to the massive Chinese consumer technology market, both Mehrotra and Mollenkopf have good reason for optimism coming out of the newly announced deal.
Trump also singled out both company CEOs in his East Room comments, calling Micron an “incredible company” and reminding Mollenkopf that he (Trump) could take the credit for Qualcomm’s rise in stature in China.
“(Qualcomm) had a merger going, and I said they should let that merger go by,” he said. “I called up President Xi, and I — they rejected it. Remember? And then they accepted it. By that time, you were off to another deal. You didn’t even want it. But nobody else could have done that, right?”
Qualcomm’s stock rose 1.95% in Thursday trading (up to $91.50 per share) and Micron saw its company shares expand by 2.30%, to $57.50 in the same trading session.
Trump also singled out Hamm, founder of Continental Resources, who the President cited as an “early supporter” of his 2016 campaign.
“Harold Hamm - he puts a straw into the ground, and oil pours out,” Trump stated. “It’s true. Other guys spend billions and billions of dollars; they can’t find oil. This guy takes a straw, he goes like this, and oil pops up.”
“Harold’s been with me from the beginning. He was with me from the day I came down the escalator with our first lady,” Trump added.
No doubt, Hamm and other energy providers can expect big returns on their close ties with the President.
Of the $200 billion worth of goods China plans to import in the next two years, $50 billion will come from U.S. energy exports, a whopping figure for an industry that has been knocking on China’s door for decades.
China is already the largest importer of oil and natural gas, and now, assuming the deal holds, oil and gas companies can earn a bigger slice of that energy importing pie in the next two years.
The benchmark iPath Series B S&P GSCI Crude Oil Total Return Index ETN (OIL) rose by 0.97% in Thursday trading, to $12.06, primarily on the U.S. and China trade deal announcement.