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3 Stocks That Could Benefit From The U.S. – China Trade Deal

  • Phase I of the U.S. - China trade deal to be announced on Wednesday
  • Markets are already pricing in a signed agreement
  • Nike, Caterpillar and Qualcomm among those stocks that are expected to profit from the deal

The U.S. and Asian markets are trading at record highs today amid signs that a U.S. – China trade deal is imminent. The stock markets have been waiting for months for Beijing and Washington to defuse their prolonged trade war.

As an apparent sign of goodwill, the U.S. Treasury Department announced yesterday that China should no longer be designated a currency manipulator.

“China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,” US Treasury Secretary, Steven Mnuchin, said.

“In this context, Treasury has determined that China should no longer be designated as a currency manipulator at this time,” the Treasury stated.

According to market analysts, the global markets are now preparing for Phase I of the agreement to be signed and announced.

“The market appears to be fully pricing a signed agreement,” said CMC Markets’ chief strategist in Sydney, Michael McCarthy.

According to the United States Trade Representative Robert Lighthizer, the agreed deal could be made public as soon as Wednesday.

As a result of the latest positive developments concerning the U.S. and China, global indexes have hit record highs. The S&P 500 closed at $3288 yesterday, which represents a fresh all-time  high. Japan’s Nikkei index trades 0.7% higher to hit its highest level in a month.

Given the overall strength of the stock market, we take a look at 3 stocks that may further benefit from the U.S.- China trade deal. 

Nike

The world’s largest athletic apparel company has gained around 15% since the beginning of November on the renewed optimism over trade deal. A few days ago, the Nike stock hit an all-time high of $102.74.

It is estimated that Nike’s sales in China account to 14% of the total global sales. However, these numbers are constantly growing. For instance, sales in China increased 20% last year. Furthermore, around 26% of Nike products are produced in China.

“When sport grows, Nike grows. China is perhaps the best current example of this phenomenon,” said Nike CEO Andrew Campion recently.

Qualcomm 

Almost all chipmakers are expected to gain from the trade deal due to the nature of their business. Qualcomm is one of the world’s largest chipmakers and the Chinese demand is huge for their business. 

In one of their previous quarterly reports, Qualcomm said it suffered from the weaker demand for high-end phones in China. Sales in China account for 67% of total global sales. 

Caterpillar

The US-based heavy equipment producer is one of the stocks that suffered the most because of the U.S.-China trade war. The company generates more than 20% of its business in China. 

The Caterpillar management has been very vocal in supporting the trade deal. 

“Caterpillar for many, many years has been an advocate of free trade, and so we think that it isn’t a zero-sum game,” said the company’s CEO Jim Umpleby recently. 

“I think the thing that’s most important is if, in fact, there was a free-trade agreement. And in fact that helps increase global economic growth. That’s a very good thing for us.”

Summary 

Global markets are hitting record highs as the public prepares for the publishing of Phase I of the trade agreement between the U.S. and China. Markets are already pricing in the successful end to lengthy negotiations, and these three stocks are expected to profit heavily from such outcome. 

About the author

Dimitar Bogdanov
Dimitar Bogdanov
I have been a journalist for Invezz since 2012 and am one of the oldest on the team. My focus is on cryptocurrencies as well as general equity markets, although my experience is broad overall.

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