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U.S.-China Trade Optimism Boosts These ETFs

Sanghamitra Saha
The Zacks Analyst Blog Highlights: Vanguard Information Technology ETF and Vanguard S&P 500 ETF

After several rounds of discussion, the United States and China started fresh talks in Washington this week and hopes are high that a trade deal will now be cut. The year 2018 was all about Trump’s protectionist agenda on trade with China.

However, the countries have been making efforts to resolve the trade dispute this year, though nothing concrete has come up yet. Currently, the countries are in the midst of a 90-day trade truce, which is due to end on Mar 1 (read: U.S.-China Trade Talks Begin: 5 Safe ETFs to Follow).

Trump had previously warned about raising the existing 10% tariff on $200 billion of imported Chinese goods to 25% in January 2019. However, the market took the latest level of negotiation in a positive way. There are reports that negotiators are working on several memorandums of understanding that would develop the basis of a final trade deal, per Bloomberg.

The talks are aimed at “achieving needed structural changes in China that affect trade between the United States and China. The two sides will also discuss China’s pledge to purchase a substantial amount of goods and services from the United States,” per the White House, as quoted on euronews.com. The talks have boosted the following ETF areas (read: Sector ETFs & Stocks to Rally on US-Sino Trade Hopes).

China

Chinese stocks staged one of their best sessions since early November as hopeful traders wagered on a resolution to the trade spat. iShares China Large-Cap ETFFXI gained 0.6% on Feb 20.

Dow

The Dow Jones is about to gain from the trade optimism as the trade talks are highly related to the manufacturing sector and exports. SPDR Dow Jones Industrial Average ETF DIA added about 0.3% on Feb 20.

Metal & Mining

While there are many factors influencing the price of copper, events in China are major contributors as the country is the world’s biggest consumer of this industrial metal, making up roughly 40% of the global copper demand.

If trade worries alleviate, demand for copper from China will rise materially due to higher growth prospects. So, London copper prices hit a fresh two-month high on trade hopes. This will benefit copper investing and copper mining ETFs like Global X Copper Miners ETF COPX. The fund was up 3.1% on Feb 20. Not only COPX, higher demand for most metals has actually driven the likes of Global Metals & Mining Producers iShares MSCI ETF (PICK) and S&P Metals & Mining SPDR XME.

Soybean

Agricultural products like yellow and black soybean faced a retaliatory tariff from China. Notably, China purchases about half the U.S. soybean. So, trade hopes favored Teucrium Soybean ETF (SOYB) (read: What's Behind the Rise in Soybean ETF?).

Casino

U.S. casino companies like Wynn Resorts WYNN, Las Vegas Sands LVS and MGM Resorts International MGM have considerable exposure to China. Needless to say, casino gaming ETF VanEck Vectors Gaming ETF BJK would benefit. The fund was up about 1% on Feb 20 (read: Moderate Earnings Put Casino ETF in Focus).

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Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
 
Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
 
MGM Resorts International (MGM) : Free Stock Analysis Report
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
VanEck Vectors Gaming ETF (BJK): ETF Research Reports
 
iShares China Large-Cap ETF (FXI): ETF Research Reports
 
SPDR S&P Metals & Mining ETF (XME): ETF Research Reports
 
Global X Copper Miners ETF (COPX): ETF Research Reports
 
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