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European stock markets surge on China-US trade breakthrough hopes
LONDON, Jan 19, 2019 (bss/AFP) – Stock markets across the globe powered
higher Friday, buoyed by hopes of a breakthrough in efforts to defuse a US-
China trade war.
European and Asian indices bounced back strongly after the Wall Street
Journal (WSJ) reported that the US was considering lifting tariffs on China
as officials look to hammer out a trade deal.
In the late New York morning, the Dow Jones was also up, having already
gained on Thursday on the report which helped the market recover from a
wobble triggered by news that the US was carrying out a criminal probe into
Chinese tech giant Huawei.
“Global markets are enjoying an overwhelmingly bullish end to the week,
with hopes of a potential breakthrough in US-China trade talks helping drive
optimism,” said Joshua Mahony, senior market analyst at traders IG.
The dollar also firmed.
The WSJ reported that US Treasury Secretary Steven Mnuchin had raised the
idea with US Trade Representative Robert Lighthizer of removing some or all
levies on Beijing in return for structural reforms.
It said the move was part of a bid to reassure markets and bolster the
odds of a bigger trade deal, ending a months-long saga that is beginning to
impact economies around the world, particularly China.
– ‘Glass half full’ –
However, the Treasury Department told AFP that no formal recommendation
had been made by either Mnuchin or Lighthizer in the talks, which were
“nowhere near completion”.
“The US government has said that there have been no formal talks to scale
back tariffs, but the market saw the half glass full as the reports signal
that concessions are in the works,” said Alfonso Esparza, senior market
analyst at OANDA.
However, there was scepticism among some analysts, with the two sides
still far apart on a number of issues, particularly regarding intellectual
property.
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On currency markets the pound edged lower, giving up earlier gains seen as
dealers bet that Britain would not leave the European Union without a deal.
After her grand Brexit plan was soundly rebuffed by MPs this week, British
Prime Minister Theresa May has called cross-party talks to put together a
“Plan B” by Monday.
If that does not work, there is a growing expectation that the March 29
exit deadline will be pushed back to give May more time to reach another deal
or possibly call another referendum.
Oil prices meanwhile rose on the China-US tariffs report and after OPEC
said it had cut output in December before a new agreement to limit supply
took effect.
Both main contracts are up around a fifth since the end of December,
thanks to an agreement to cut output by OPEC and other key producers
including Russia.
That followed almost three months of losses that wiped around 40 percent
off prices amid concerns supply was running ahead of demand.
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