The U.S. & China Have Reached A Preliminary “Phase One” Trade Agreement

Plus, U.K. Prime Minister Boris Johnson won a landslide victory and promises Brexit by the end of January, the House is expected to vote on two articles of impeachment agains President Trump next week, and Oracle shares are down.

Stocks fell to start Friday with the Dow down 46 points, or 0.2%. The S&P 500 also dipped by 0.2%, while the Nasdaq traded around the flatline.

Chinese officials confirmed China and the U.S. have reached a preliminary agreement on the text of the phase one trade deal. As part of the agreement, the U.S. will scrap plans for tariffs set to take effect this Sunday and will reduce other tariffs on Chinese goods from the trade war in phases, while China will consider cancelling retaliatory tariffs set for December 15 and will increase agricultural purchases over the coming years. Both sides have said they would work on making changes related to intellectual property, technology transfers, and financial services. Up next, the agreement still needs to go through legal procedures in both countries before President Donald Trump and Chinese President Xi Jinping sign the accord. “President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship,” said U.S. Trade Representative Robert Lighthizer in a statement. “This unprecedented agreement accomplishes those very significant goals and would not have been possible without the President’s strong leadership.”

However, there have been reports that, despite the preliminary agreement, China has concerns that the hard targets the U.S. is pushing for in terms of agricultural purchases could hurt its relationship with other trading partners, and there is also concern that Trump could eventually reimpose tariffs on Chinese goods despite signing the “phase one” deal. And in the U.S., one of the democrats most supportive of Trump’s crackdown on trade with China, Senate Majority Leader Chuck Schumer, said the president “sold out” on the new agreement. “There are huge structural inequities, structural and unfair imbalances, with China’s trade relationships with the U.S. At first, President Trump seemed like the only president who would dare tackle this challenge; but now, according to reports, he has sold out for a temporary and unreliable promise from China to purchase some soybeans,” Schumer said in a statement. “We’ve heard this song and dance from China before. Once again, Donald Trump cannot be relied upon to do the right thing for American workers and businesses, even when his statements were pointing in the right direction.”

In the U.K., Prime Minister Boris Johnson secured the biggest Conservative Party victory since 1987 yesterday. The Conservatives now have 365 seats in parliament, a majority of 80 in the House of Commons. With a majority, the next order of business is passing Brexit. “We will get Brexit done on time by the 31st of January, no ifs, no buts, no maybes,” Johnson said. Market reaction to the result has been positive, with the pound rallying to a record high. In the face of defeat, the Labour party’s Jeremy Corbyn announced he will stand down as leader of the Labour opposition.

The House Judiciary Committee approved two articles of impeachment against President Trump this morning after two days of heated debate. The articles will now be sent to the House floor for a final vote, which is expected to vote on the articles next week before Congress goes on recess for the Christmas holiday. “The institutional power of Congress to safeguard our liberties by providing a check and balance on the executive is crucial to the Constitution scheme to protect our liberties,” Judiciary Chairman Jerrold Nadler said last night. If the House passes the articles of impeachment, the Senate will conduct a formal trial of the president, likely next month, presided over by Chief Justice John Roberts of the Supreme Court. 

Oracle shares are down nearly -3% this morning after the enterprise software company posted mixed results for its fiscal second quarter. Oracle posted revenue of $9.61 billion, up 1% year-over-year, shy of analysts’ estimates for revenue of $9.65 billion. “We had another strong quarter in our Fusion and NetSuite cloud applications businesses with Fusion ERP revenues growing 37% and NetSuite ERP growing 29%,” said Oracle CEO Safra Catz in a statement. “This consistent rapid growth in the now multibillion dollar ERP segment of our cloud applications business has enabled Oracle to deliver a double-digit EPS growth rate year-after-year. I fully expect we will do that again this year.” But Wedbush analysts Steve Koenig and Ahmad Khalil said in a note to clients that, “After weaker 1Q results (+1.6% in constant currency), the company needs to pick up the pace for the remainder of the year.”

Stocks We’re Watching

Advanced Micro Devices (NASDAQ: AMD): AMD shares surged to another new all-time high this week. This year, the company’s Ryzen processors have dominated Intel and Nvidia chips, which led Nomura Instinet analyst David Wong to reaffirmed his Buy rating for AMD shares in a note to clients. “We think that AMD will continue to gain microprocessor market share in desktop, notebook, and server processors through 2020,” Wong wrote.

Huntsman Corporation (NYSE: HUN): Huntsman  shares are up more than 10% over the last week following the company’s announcement that it had agreed to acquire Icynene-Lapolla, a manufacturer and distributor of spray polyurethane foam (SPF) insulation systems. President and CEO Peter Huntsman said of the deal, “As the demand for energy efficiency continues to grow, both in residential and commercial construction, this combination of companies will provide Huntsman with the largest global array of spray foam technology, integration of raw materials and associates. This is the size and type of downstream assets that we will continue to add to our Company as we strengthen margins, move downstream and be less reliant on a single product or application.”