Asian markets rallied yesterday after Donald Trump hailed “very good” phone talks with Xi Jinping and said they would meet at the G20 next week, renewing hopes for a deal to end a bruising trade war.
The US president’s comments provided a much needed boost to investors after a month of volatility sparked by his shock decision to hit China with fresh tariffs, ending months of apparently positive negotiations.
Adding to the upbeat mood were comments from the European Central Bank head Mario Draghi hinting at a cut in interest rates to support the stuttering eurozone economy.
The Federal Reserve is also due to end its latest policy meeting later Wednesday, with dealers hoping for some idea about its plans for rates.
After a healthy lead from Wall Street, the vast majority of Asia’s markets posted gains of at least 1% — with Hong Kong leading the way by jumping more than 2%. Tokyo ended 1.7% higher, Shanghai added 1%, Singapore put on 1.4% and Sydney 1.2%. Taipei added two %, while Wellington, Seoul, Manila, Jakarta and Bangkok were above the 1% level.
Mumbai was also in positive territory.
In early European trade, London dipped 0.1%, having risen more than 1% Tuesday, while Frankfurt and Paris were also slightly higher.
The rally was sparked after Trump tweeted: “Had a very good telephone conversation with President Xi of China.
We will be having an extended meeting next week at the G-20 in Japan.
Our respective teams will begin talks prior to our meeting.”
Later he told reporters “the meeting might very well go well”, adding that China wanted to make a deal.
“China and the US will both gain by co-operating and lose by fighting,” Xi told Trump, according to a readout by Chinese state broadcaster CCTV.
Trump’s tweet followed weeks of speculation about whether the heads of the two most powerful economies would actually meet on the sidelines of the G20 in Osaka.
Trump had warned that if Xi did not turn up he would hike tariffs on virtually all China’s exports to the US.
However, analysts pointed out that it was in both of their interests to bring an end to the long-running dispute.
“There is strong incentive for both presidents to re-engage,” said Tai Hui, chief market strategist for Asia-Pacific at JP Morgan Asset Management. “Trump is kick-starting his (re-election) campaign and he will need strong economic performance over the next 18 months.
President Xi will also need trade tensions to cool down to support China’s domestic economy, while pursuing financial market liberalisation.”
The optimism underpinned a rally in riskier assets, with high-yielding currencies benefiting.
South Korea’s won jumped 0.8%, the South African rand added 0.9% and Indonesia’s rupiah gained 0.4%. The Chinese yuan, which has struggled in recent weeks, climbed 0.4%. The euro, however, extended Tuesday’s losses after Draghi’s remarks that weak growth and soft inflation could lead to further rate cuts to historic lows.
He also batted back an accusation from Trump of currency manipulation, saying the ECB’s mandate “is price stability”. Oil prices also pushed ahead — sending regional energy firms soaring — after rallying on hopes that a resolution to the trade war would boost demand for the commodity.
Brent climbed almost 2% and WTI almost 4% on Tuesday.
Investors were also cheered by news Opec has decided on a date for its next meeting, with hopes the group and its other key producers led by Russia will extend output curbs beyond this month to soak up excess supplies.
“Saudi Arabia is already cutting output ahead of the meeting. Saudi is also preparing to push for better compliance among producers such as Iraq and Nigeria,” ANZ Bank said in a note.
The bank added that the group’s Economic Commission Board said it expects global stockpiles to drop by 500,000 barrels a day if producers continue their caps into the second half of the year.
In Tokyo, the Nikkei 225 closed up 1.7% to 21,333.87 points; Hong Kong — Hang Seng ended up 2.6% to 28,202.14 points and Shanghai — Composite closed up 1.0% to 2,917.80 points yesterday.
An external view of the Tokyo Stock Exchange. The Nikkei 225 closed up 1.7% to 21,333.87 points yesterday.
