Shanghai leads Asia markets rally as Trump extends China tariff deadline

Investors looking at computer screens showing stock information at a brokerage house in Shanghai, China, on Sept 7, 2018.
Investors looking at computer screens showing stock information at a brokerage house in Shanghai, China, on Sept 7, 2018.PHOTO: REUTERS

HONG KONG (AFP, REUTERS) - Shanghai surged more than five per cent on Monday (Feb 25), leading a rally across Asian markets after Donald Trump said he would delay a hike in tariffs on Chinese goods citing “substantial progress” in trade talks and fuelling hopes of an end to the long-running stand-off.

Optimism over the negotiations had already provided support to global equities, spurring a rally in January and February, but the US president’s comments gave extra ammunition to investors to ramp up buying.

The news also fired currency markets with the yuan extending gains to a seven-month high, while other high-yielding, riskier units were also up against the US dollar.Trump said on Twitter that the US “has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues”.

He added: “As a result of these very productive talks, I will be delaying the US increase in tariffs now scheduled for March 1.”
Trump’s tweeted remarks are the clearest sign yet that the United States and China are moving towards a deal to end a trade war that has dragged on for months, dragging on global growth and disrupting markets.

The president also said he planned to hold a summit with his Chinese counterpart Xi Jinping at his Mar-a-Lago estate in Florida to sign a deal.

China’s Xinhua news agency added that the two sides had “made substantial progress on specific issues” including on transfer of technology, intellectual property and agriculture.

 

Chinese blue chips scaled their highest in eight months on the back of a 6 per cent gain, their biggest daily increase since July 2015. They are up nearly a quarter this year.

Hong Kong and Tokyo ended 0.5 per cent higher. Sydney put on 0.3 per cent, while Seoul was 0.1 per cent higher, Taipei added 0.7 per cent and Jakarta rose 0.4 per cent.

Singapore’s Straits Times Index, however, was little changed, inching up 2.45 points to 3,272.35.

The gains in Asia followed another positive lead from Wall Street, where the Dow enjoyed its ninth straight weekly gain -- the longest streak since May 1995.

 

“This is a sigh of relief,” said Ben Emons, managing director for global macro strategy at Medley Global Advisors. “Markets will still keep a level of caution, but this news is encouraging,” he told Bloomberg TV.

The upbeat sentiment lifted high-risk currencies, with the yuan hitting its highest level against the US dollar since July, while South Korea’s won, the Australian dollar and the Indonesia rupiah were also well up.

Forex traders will be closely watching speeches this week from top Federal Reserve officials - including chairman Jerome Powell’s appearance in front of lawmakers - hoping for clues about the bank’s monetary policy plans.
Wall Street “will be looking for soothing comments about the future size of the balance sheet - the bigger the better - and insights into future rate hikes”, said Jeffrey Halley, senior market analyst at OANDA.