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Asian markets surge on Trump-Xi breakthrough, oil rallies
HONG KONG, July 1, 2019 (BSS/AFP) – Asian markets surged Monday after
Donald Trump and Xi Jinping agreed to restart trade talks, reviving hopes of
an end to their tariffs war, while oil prices also rallied on news that Saudi
Arabia and Russia will extend their output caps.
Trump’s historic visit to North Korea, where he met leader Kim Jong Un,
soothed geopolitical concerns and added to the upbeat mood on trading floors.
After a highly anticipated meeting on the sidelines of the G20 summit
Saturday, the US president said negotiations to resolve the standoff between
the world’s two biggest economies were “back on track” and threatened new
levies on Chinese goods would be held off.
Trump also signalled a softer position on Chinese telecom giant Huawei, a
major bone of contention in the row, by saying US companies could sell
equipment “where there’s no great national security problem”, White House
economic advisor Larry Kudlow said Sunday.
While there had been a quiet sense of optimism the talks would end with an
agreement to return to the negotiating table, the apparent concession on
Huawei took some by surprise and provided some extra buying support.
The news was much-needed after Trump sparked volatility in early May with
his shock decision to hit China with new tariffs and halt talks that had
seemed to be nearing a positive end.
– ‘Sigh of relief’ –
“After spending the better part of two months in trade war purgatory and
with G20 done and dusted, risk markets have responded to Saturday’s events in
a reveller tone,” said Stephen Innes at Vanguard Markets.
“Indeed, investors heaved a massive, but exhausted, sigh of relief that
both the US and China opted to push the reset button and restart trade
negotiations amidst other pleasantries — now we’ll have to see whether it
all sticks.”
Shanghai jumped 2.1 percent in the morning while the Chinese yuan climbed
to its strongest level in almost two months. Soft factory activity data
indicated continued weakness in the world’s number two economy, though
analysts said the readings could press the central People’s Bank of China to
unveil fresh stimulus measures.
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Tokyo ended the morning 1.8 percent higher, Singapore rallied 1.2 percent
and Taipei was 1.5 percent higher, with Sydney, Seoul, Wellington and Manila
also higher. Hong Kong was closed for a public holiday.
Oil prices were also on a roll, with both main contracts jumping more than
two percent as the Trump-Xi agreement came with news that Russia and OPEC
cartel kingpin Saudi Arabia had agreed at the G20 to extend a deal to limit
output.
Innes added that “even with some long-term uncertainty on US-China trade
leaking into the equation, I think medium-term risks to oil prices remained
skewed to the upside, as Middle East tension continues to percolate, and we
anticipate more easing from the PBoC. Both positives for oil prices”.
The optimistic tone hit demand for safe haven gold, which sank below
$1,400.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.8 percent at 21,658.93 (break)
Shanghai – Composite: UP 2.1 percent at 3,041.75
Hong Kong – Hang Seng: Closed for a holiday
Dollar/yen: UP at 108.21 yen from 107.82 at 2110 GMT
Euro/dollar: DOWN at $1.1348 from $1.1375
Pound/dollar: UP at $1.2704 from $1.2700
West Texas Intermediate: UP $1.21 at $59.68 per barrel
Brent North Sea crude: UP $1.37 at $68.11 per barrel
New York – Dow: UP 0.3 percent at 26,599.96 (close)
London – FTSE 100: UP 0.3 percent at 7,425.63 (close)
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