AFP, Reuters/ London
Stock markets mostly retreated yesterday on profit-taking at the end of a positive week for equities thanks to US-China trade talk hopes.
Several announcements from the trade war front have fanned hopes that the world’s economic superpowers — who are currently finalising a mini trade pact as part of a wider deal — can resolve a long-running tariffs war that has hobbled the global growth outlook.
Yesterday, the White House trade adviser said that President Donald Trump could postpone tariffs on Chinese goods scheduled to take effect in December.
“It’s been a solid week of gains for global equity markets against a backdrop of a vast improvement in investor sentiment about the prospects for a resolution and thaw in US, China trade relations,” said Michael Hewson, chief market analyst at CMC Markets UK.
He cautioned, however, “as we have been here before, only to find that both sides have stepped back due to concerns that they may be perceived as having given too much away”.
“The elevation of discussion from a trade truce to a possible tariff rollback is important and suggests both China and the US have come under pressure to seal a deal,” National Australia Bank’s Tapas Strickland said in a note to clients yesterday.
White House spokeswoman Stephanie Grisham told the Fox News Channel: “I cannot get ahead of the talks with China, but we are very, very optimistic that we will reach a deal soon.”
However, a report said there was some opposition within the administration to such a move.
Trump himself told reporters yesterday that he would not remove all the existing tariffs imposed on Chinese goods, and that a deal would be signed in the United States.
Neil Wilson, chief market analyst at Markets.com, said: “If a first phase trade deal is done, there is agreement to roll back some existing tariffs, but only if the deal is agreed. Usual story — mixed reports really all just noise.”
European stocks were around half a percent down on the day by the close.
London’s FTSE 100 closed 0.6% down at 7,359.38 points, Frankfurt’s DAX 30 ended 0.5% lower at 13,228.56 points and
Paris’ CAC 40 finished flat at 5,889.70 points, while the EURO STOXX 50 lost 0.2% at 3,699.65 points.
Earlier in Asia, Hong Kong closed lower following a six-day advance, while dealers in the city were bracing for a fresh weekend of protests after the death of a student who sustained head injuries when he fell during clashes with police.
Shanghai also weakened after data showed Chinese exports and imports fell again last month, though not by as much as expected.
“The trade deal is the predominant driver”, for markets at the moment said Lars Kreckel, global equity strategist at Legal & General Investment Management, noting that a dip in stock markets was a just knee-jerk reaction to the latest news on the US-China front.
The mood contrasts with Thursday’s surge of optimism in global markets on news Beijing and Washington had agreed to roll back tariffs as part of a first phase of a trade deal.
Worries the pact could fall apart are now prompting some investors to sell heading into the weekend.
“Perhaps we do get the phase one deal and a detente, but when we get into next year there will be big issues that both the US and China have big disagreements on,” said James Rossiter, head of global macro strategy at TD Securities.
“If anything, markets realise that it will take more of a formal process to get things going and make progress.”
After the blue-chip Dow and broader S&P 500 reached record closing highs on Thursday amid hopes of a trade war truce, US stock futures pointed to a flat to slightly softer start for Wall Street shares.
Caution appeared to be the order of the day across world markets.
Sovereign bond markets steadied after taking a beating this week from US-China trade talk optimism.
The US 10-year Treasury yield stood at 1.92%, down from three-month highs hit on Thursday.
Still, it is up 19 basis points this week and set for its biggest weekly rise in a month. Safe-haven German Bund yields were also set for their biggest weekly rise in a month.
Crude oil futures meanwhile fell amid lingering uncertainty over the long-awaited trade deal and rising crude inventories in the United States.
At 1150 GMT, Brent crude was down 1.7% at $61.21 a barrel, while US West Texas Intermediate crude also tumbled 1.7%, to $56.19.
In currency markets, the dollar edged up against other major currencies.
The greenback was a touch firmer at 109.40 yen, nearing a five-month high of 109.49 set the previous day.
The euro was 0.2% weaker at $1.10285, while the dollar index hovered at three-week highs.
A Reuters poll found that the dollar’s persistent strength would continue well into next year.
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