US open: Stocks mixed after Trump accuses China of violating trade agreement

(Sharecast News) - Wall Street trading got off to a mixed start on Friday after Donald Trump claimed that China had violated their preliminary trade agreement, reviving fears that the US may be on the brink of a protracted trade war.

As of 1515 BST, the Dow Jones Industrial Average was up 0.05% at 42,256.46, while the S&P 500 lost 0.13% to 5,904.77 and the Nasdaq Composite came out of the gate 0.37% weaker at 19,104.37.

The Dow opened 22.92 just points higher on Friday, narrowly extending gains recorded in the previous session as market participants digested news that, while a federal court struck down Donald Trump's so-called "reciprocal" tariffs, an appeals court later allowed them to be reinstated until next week as it prepared to hear the White House's argument.

Stocks headed south after Trump said on social media that China had reneged on the pair's current trade agreement, which paused retaliatory tariffs, while the blue-chip Dow Jones later managed to claw itself back into positive territory.

"Two weeks ago, China was in grave economic danger! The very high Tariffs I set made it virtually impossible for China to TRADE into the United States marketplace which is, by far, number one in the World. We went, in effect, COLD TURKEY with China, and it was devastating for them. Many factories closed and there was, to put it mildly, 'civil unrest'. I saw what was happening and didn't like it, for them, not for us. I made a FAST DEAL with China in order to save them from what I thought was going to be a very bad situation, and I didn't want to see that happen," said Trump.

"Because of this deal, everything quickly stabilized and China got back to business as usual. Everybody was happy! That is the good news!!! The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr NICE GUY!"

Treasury Secretary Bessent said that US-Sino trade talks were "a bit stalled", while trade representative Jamieson Greer stated the White House was "very concerned" with China's purported non-compliance with the temporary trade deal.

"United States did exactly what it was supposed to do, and the Chinese are slow rolling their compliance," said Greer, something he called "completely unacceptable and has to be addressed".

Market participants were also zeroed in on news that US inflation cooled for a second straight month in April, according to the Bureau of Economic Analysis' personal consumption expenditures price index, which declined to 2.1% on an annualised basis in April, the lowest reading in seven months, down from 2.3% in March and below consensus estimates of 2.2%. The core PCE price Index, which strips out volatile food and energy prices, rose 2.5%, down from an upwardly revised reading of 2.7% in March and in line with estimates. On a monthly basis, both headline and core PCE rose 0.1%, while the report also revealed that personal income and spending had grown 0.8% and 0.2% month-on-month, respectively.

Elsewhere on the macro front, the US trade deficit in goods narrowed sharply in April, according to the Census Bureau, dropping from a record high of $162.3bn in March to $87.6bn, marking the smallest monthly trade gap in 18 months. The marked improvement seen in the preliminary reading was principally due to a 19.8% decline in imports, more than reversing the 5.7% uptick seen in March as companies tried to get ahead of Trump's so-called "reciprocal" tariffs. Elsewhere, exports rose 3.4% in April following a 2.3% uptick in March.

On another note, US wholesale inventories were flat month-on-month in April, according to the Census Bureau, coming in at $907.0bn after a downwardly revised 0.3% uptick in March, missing consensus estimates of a 0.4% increase. Durable goods inventories fell by 0.2% according to the preliminary estimate, following a 0.5% increase in March, while inventories of non-durable goods rose 0.4%, following the previous month's flat reading. On an annualised basis, wholesale inventories grew 2.1% in April.

Still on data, the Institute for Supply Management's Chicago PMI fell to 40.5 in May, down from 44.6 in April and confounding analysts who had expected it to improve to 45. The reading indicated that economic activity in the Chicago region had contracted for an 18th month in a row, and at its sharpest rate of decline in four months.

Finally, the University of Michigan's consumer sentiment index was revised sharply higher in May, up to 52.2 from a preliminary of 50.8, matching April's figures and holding steady at 2022-lows. Consumer expectations rose to 47.9 from 47.3, better than 46.5 in the preliminary estimate, while the gauge for current conditions worsened to 58.9 from 59.8.

Reporting by Iain Gilbert at Sharecast.com

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