Stock markets jump as Trump boosts trade deal hopes

US Treasury Secretary Steven Mnuchin (centre) returns to a hotel in Beijing on February 13, 2019, after meetings ahead of formal trade talks with Chinese officials. — AFP pic
US Treasury Secretary Steven Mnuchin (centre) returns to a hotel in Beijing on February 13, 2019, after meetings ahead of formal trade talks with Chinese officials. — AFP pic

LONDON, Feb 13 — Stock markets jumped today on hopes of a breakthrough in the US-China trade war.

The dollar mostly rose, while oil prices rallied on news that Opec crude output hit a four-year nadir.

The pound weakened after official data showed UK inflation hit a two-year low and as the Brexit impasse drags on without a breakthrough in sight.

In the US, President Donald Trump said he may extend his trade deal deadline with Beijing, while a report claimed his Chinese counterpart Xi Jinping would meet with top US officials, seeming to boost the prospects of an agreement.

High-level talks are due to begin in the Chinese capital tomorrow aimed at an accord to stop sharp US tariff hikes that could damage the global economy.

Trump said he could let his March 1 deadline for the tariffs “slide for a little while” if the two sides were close to a meaningful deal, adding that he expects a summit with President Xi “at some point”.

Later, a report in the South China Morning Post said Xi would personally meet the US delegation in Beijing, suggesting a redoubled effort to make progress on a deal.

Washington is demanding changes from Beijing on what it says are unfair commercial practices. A resolution would prevent US tariffs more than doubling on US$200 billion in Chinese imports next month.

Tokyo stocks added a further 1.3 per cent after yesterday’s gains to finish at a two-month high.

Hong Kong rose 1.2 per cent, and Shanghai earned 1.8 per cent on the news, following Wall Street’s lead.

European equities also climbed, with London up 0.6 per cent, Paris 0.3 per cent and Frankfurt 0.2 per cent nearing the half-way stage.

However, some analysts struck a cautious tone, noting that much work needs to be completed before a framework agreement is in reach.

“The rally in stocks has been based on hope rather than any concrete agreements overnight,” warned Oanda senior analyst Jeffrey Halley, predicting short-term volatility to come as headlines emerge from Beijing.

Elsewhere Sydney shed 0.3 per cent, with calls for a snap election amid political tensions over refugees adding to underwhelming corporate earnings and subdued metal prices.

Shutdown unlikely

The New Zealand dollar soared 1.5 per cent as the central bank held interest rates unchanged and forecast no moves until 2021 — defying expectations it may follow dovish leads elsewhere by indicating a rate cut.

Renewed global investor confidence saw a movement away from the greenback — which has enjoyed a strong rally in the past week — to riskier currencies.

The pound moved upwards past US$1.29, despite no-deal Brexit fears as Prime Minister Theresa May was accused by the opposition of “running down the clock” and “playing chicken” with Brussels over talks.

The yuan also earned back losses after it had dropped following the Lunar New Year break.

Trump’s suggestion that another chaotic US government shutdown was now unlikely following a deal struck in Congress over border security further fuelled risk appetite.

The deal to offer nearly US$1.4 billion for construction of a Mexico border wall, as well as other security measures, fell far short of Trump’s demands but has been presented as a workable compromise.

“I don’t think you’re going to see a shutdown,” said the president.

Key figures around 1130 GMT

London – FTSE 100: UP 0.6 per cent at 7,173.57 points

Frankfurt – DAX 30: UP 0.2 per cent at 11,144.37

Paris – CAC 40: UP 0.3 per cent at 5,068.78

EURO STOXX 50: UP 0.2 per cent at 3,196.47

Tokyo – Nikkei 225: UP 1.3 per cent at 21,144.48 (close)

Hong Kong – Hang Seng: UP 1.2 per cent at 28,497.59 (close)

Shanghai – Composite: UP 1.8 per cent at 2,721.07 (close)

New York – Dow: UP 1.5 per cent at 25,425.76 (close)

Euro/dollar: FLAT at US$1.1315 from US$1.1315 at 2130 GMT Tuesday

Pound/dollar: DOWN at US$1.2877 from US$1.2896

Dollar/yen: UP at 110.68 yen from 110.48 yen

Oil – Brent Crude: UP 97 cents at US$63.39 per barrel

Oil – West Texas Intermediate: UP 58 cents at US$53.68