Stock markets rose yesterday after recent volatility as investors weighed hopes for US-China trade talks against President Donald Trump’s telecoms equipment ban that was seen as a kick against Beijing.
Trump has issued an executive order, citing national security grounds, that effectively bars Chinese giant Huawei from the US market.
Huawei was also added to a list that would make it much harder for the Chinese firm to access crucial US components, a move likely to ramp up tensions with Beijing as the two economic titans engage in a drawn-out trade war that threatens global business activity.
“The conflicting signals over trade are likely to simply spark more uncertainty and confusion in the market, and investors will continue to scatter and reassess their appetite towards taking on risk as a result,” said Lukman Otunuga, a research analyst at FXTM.
Eurozone stock markets were up well over 1% by the close, with London not far behind, mostly thanks to a weak pound.
London’s FTSE 100 closed 0.8% up at 7,353.51 points, Frankfurt’s DAX 30 ended 1.7% up at 12,310.37 points and Paris’ CAC 40 finished trading 1.4% up at 5,448.11 points, while the EURO STOXX 50 gained 1.6% at 3,338.56 points.
On Wall Street the Dow was nearly 300 points higher in the late New York morning.
“It’s been quite the couple of weeks on the trade war front,” noted Craig Erlam, senior market analyst at Oanda trading group.
“We’ve gone from a deal being close to done, to talks collapsing and tariffs imposed and now Trump seeking to alleviate market concerns.”
The Trump administration has for months tried to persuade allies not to allow China a role in building next-generation 5G mobile networks, warning that doing so would result in restrictions on sharing of information with the United States.
The announcement comes after the US last week hiked tariffs on $200bn of Chinese goods, to which Beijing retaliated in kind, fanning fears their the trade war — which seemed all but over just weeks ago — could instead worsen.
In Hong Kong yesterday, the main stocks index ended flat, although ZTE — another Chinese telecoms equipment provider — shed more than 6%.
Shanghai closed 0.6% higher.
On foreign exchange markets, the dollar recovered some losses triggered by speculation that the Federal Reserve could cut US interest rates to fend off the effects of the trade war and slowing economic growth.
Just months ago, some commentators had forecast up to three US rate hikes this year.
“Depending on how long this standoff with China lasts, that impacts growth for longer and might force the Fed’s hand,” Esty Dwek, at Natixis Investment Managers, told Bloomberg TV.
“I wouldn’t expect any big change in the short term, but the possibility of a cut much later in the year has risen.”
Oil prices rose against the background of high Saudi-Iran tensions ahead of an Opec meeting that is to take stock of the cartel’s production cut deal.
The dollar was firmer against all its major rivals, but the British pound suffered a particularly strong decline amid intense speculation that Prime Minister Theresa May will step down if her next attempt to get parliament to approve her Brexit deal fails, dealers said.
“The pound tumbles as Theresa May looks set to leave in June,” said Joshua Mahony, senior market analyst at IG.
“For markets this is ramping up the likeliness of a hard Brexit, as pushes for a more hardline Brexiteer to take over is raising fears that we could see the UK leave the EU without a deal in October,” he said.
Earlier, Britain’s Burberry lost 3.9% after reporting a 6% drop in adjusted operating profit for the fiscal year.
Paris-listed LVMH, Hermes and Kering fell 0.6% to 1%. Italy’s Moncler dropped 1.6%. Ubisoft’s shares lost 10% after the French video games group’s fourth-quarter results missed market forecasts.
Britain’s CYBG Plc, owner of Clydesdale and Yorkshire Bank, dropped about 5%, a day after its results showed it swung to a profit in the first half of the year.
Thyssenkrupp rose 4.5% after Reuters reported that Finland’s Kone might bid for the €14bn ($15.7bn) Thyssenkrupp elevator division.
Kone shares advanced 3.3%. Nestle SA shares reached a record high after reporting it had entered exclusive talks to sell its skin health business to a consortium led by private equity firm EQT Partners, in a deal worth 10.2bn Swiss francs ($10.12bn).
Defensive stocks — healthcare, utilities and real estate stocks — also rose.
In basic materials, Norsk Hydro gained after a Brazilian federal court lifted one of two production embargoes on a plant owned by the Norwegian metals maker.
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