Markets rally as Trump claims US and China are discussing possible trade agreement
Markets moved upwards this morning on hopes the US’s trade war with China might be easing.
The Stoxx Europe 600 – which tracks Europe’s biggest firms including the FTSE 100 – rose by one per cent while Asian stocks rallied.
Hong Kong's Hang Seng Index grew by over four per cent and China's Shanghai Composite and Japan's Nikkei both grew by around 2.5 per cent.
It comes after President Donald Trump used Twitter to relay a “long and very good conversation” with his China counterpart President Xi Jinping.
“We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!” he said.
https://twitter.com/realDonaldTrump/status/1057997981922873344
Bloomberg reported that Trump hopes to sign a trade agreement with China at the G20 meetings, and has asked officials to begin drafting possible terms, citing anonymous sources.
It comes after the US and China have imposed tariffs on each other’s exports worth billions of dollars.
The US has hit more than $250bn of Chinese exports with tariffs this year while hinting of more to come, while China has retaliated with tariffs of its own on $110bn of US goods.
Meanwhile, the US has forbidden firms from supplying equipment to Chinese chipmaker Fujian Jinhua over national security concerns.
The rebound today comes in spite of a lack of detail of what a US-China trade deal might look like, but after an October in which global stocks experienced a horror show sell-off, with US tech stocks losing $172bn in a single day.
Craig Erlam, senior market analyst at foreign exchange firm Oanda, welcomed the good news.
“Investors will be feeling much more at ease now, although it’s still too early to call the end of the sell-off,” he said. “Naturally though, all this talk of a trade deal between the world’s two largest economies that are currently engaging in a tariff tit-for-tat, is a supportive factor that could prevent another slump.”
However, he sounded a sceptic note of the timing of Trump’s tweet, coming less than a week before the US midterm elections.
“Trump has been a cheerleader of the markets since his election victory and the timing of the sell-off will have really frustrated him, even if the declines we’ve seen pale in comparison to the post-election rally,” Erlam explained.
“It would seem this call comes at a very opportunistic time as it stops the rot in the markets and gives the impression that after months of tariffs and fiery rhetoric, progress is being made on improved trade terms with China. It’s a win-win for Trump. I just hope the cynic in me is wrong and this is an important first step towards better trade relations between the two.”