NEW YORK, Aug 14 ― US and European stocks jumped, the dollar strengthened and Treasury prices rose yesterday after the United States said it would delay tariffs on some Chinese products, easing concerns that a protracted trade war would harm global growth.
President Donald Trump backed off his plan to impose 10 per cent tariffs on September 1 on remaining Chinese imports, delaying duties on cellphones, laptops and many other consumer goods in the hopes of blunting their impact on US holiday sales.
Equity, debt and currency markets sharply reversed course minutes after Wall Street opened for trade on news from Hong Kong about a call Chinese Vice Premier Liu He held with US officials, according to China's Commerce Ministry.
Liu spoke with US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin yesterday evening, a ministry statement said.
Shares of Apple Inc, a likely beneficiary of the tariff delay, rose 4.5 per cent and the information technology sector rose 2.46 per cent, the biggest gainer among the 11 S&P 500 sectors.
Investors are closely watching the headlines and that is what markets are trading off of, said Candice Bangsund, a global asset allocation strategist at Fiera Capital in Montreal.
“The news today is obviously good news. Risk appetite has improved drastically but it's consistent with the environment of elevated uncertainty,” Bangsund said.
Global growth should re-accelerate later this year as major central banks cut interest rates and recent economic data proves better than where markets have traded on it, Bangsund said.
The damage created by tariffs will not go away because economic uncertainly remains, said Kristina Hooper, chief global market strategist at Invesco in New York.
“We can continue in the situation we've been in for months which is one step forward, further into the trade war abyss, followed by one step or a half step backwards,” Hooper said.
Wall Street rallied on news of the tariff delay.
The Dow Jones Industrial Average rose 372.54 points, or 1.44 per cent, to 26,279.91. The S&P 500 gained 42.57 points, or 1.48 per cent, to 2,926.32. The Nasdaq Composite added 152.95 points, or 1.95 per cent, to 8,016.36.
Major stock bourses in Europe also surged, with the Euro STOXX index of eurozone shares closing 0.92 per cent higher.
Major equity indices had tumbled roughly 5 per cent since late July on growing concerns that the ongoing US-Chinese trade dispute would slam global growth and fester unresolved until after the November 2020 US presidential election.
Markets also had slipped, with gold earlier hitting a more than six-year high, as the unrest in Hong Kong and a rout in the Argentine peso drove investors already rattled by the trade war into havens such as bullion, bonds and the yen.
The yen benefits in moments of geopolitical uncertainty and during economic downturns. The US dollar rose 1.27 per cent to ¥106.63 (RM4.19) per dollar.
Yields on the benchmark US 10-year Treasury notes hit session highs, while those on 30-year Treasury bonds rallied from more than three-year lows. Traders earlier were bracing for 30-year yields to sink to a record low below 2.08 per cent.
The 10-year Treasury fell 15/32 in price to push its yield up to 1.6949 per cent.
Oil prices rose more than 3 per cent on the trade news.
Brent futures settled up US$2.73 at US$61.30 a barrel, while US West Texas Intermediate (WTI) crude rose US$2.17 to settle at US$57.10 a barrel.
Prior to yesterday's gains, Brent had traded down more than 20 per cent since hitting a year high in April.
The Argentine peso was less volatile, trading in a tighter range, down 6.04 per cent at 55.30 to the dollar.
US gold futures settled down 0.2 per cent to US$1,514.1 an ounce. ― Reuters
