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Markets Cheer, Tentatively, After U.S.-China Trade Truce Markets Cheer, Tentatively, After U.S.-China Trade Truce
(about 7 hours later)
HONG KONG — Asian markets jumped on Monday after President Trump and President Xi Jinping of China reached a deal to put their trade war on pause, a sign of exuberance tempered by the broad consensus that the fragile peace may not last long. LONDON — Markets in Asia and Europe rose on Monday after President Trump and President Xi Jinping of China reached a truce in the two countries’ trade war, a sign of exuberance among investors that was tempered by a broad consensus that the fragile peace might not last long.
Chinese shares led the rise, rising as high as 3 percent in morning trading, with the market in Hong Kong following closely. Investors in other markets were more restrained, sending shares up less than 2 percent in places like Japan, Australia and South Korea. Chinese shares led the rise, climbing as much as 3 percent in morning trading, with the market in Hong Kong following closely. Investors elsewhere were more restrained, sending shares up less than 2 percent in Australia, Japan and South Korea.
Futures contracts that try to predict the performance of the S&P 500 stock index were up more than 1 percent on Monday, suggesting Wall Street would also open with a bounce. Markets in Europe followed a similar trajectory, with many of the region’s benchmarks up more than 2 percent in early trading.
Other kinds of financial markets also responded to the truce, which was reached Saturday. Soybeans rose on commodities markets on the prospect that China would begin buying American-grown crops again. China’s currency, the renminbi, strengthened against the United States dollar. Futures contracts that try to predict the performance of the S&P 500 were up more than 1 percent early in the day, suggesting that Wall Street would also open with a bounce.
The truce, forged over a dinner in Buenos Aires between the leaders of the word’s two largest economies, merely postpones a reckoning over trade. Under the deal, the United States will postpone an increase in tariffs set for Jan. 1, and it sets a March 1 deadline for the two sides to reach a more extensive pact. Other markets responded in kind to the truce, which was reached Saturday in Buenos Aires. Soybeans rose on commodities markets on the prospect that China would begin to buy American-grown crops again. China’s currency, the renminbi, strengthened against the United States dollar.
But the deal leaves in place American tariffs on $250 billion in Chinese goods as well as retaliatory measures enacted by Beijing. It remains unclear whether the two sides will be able to resolve thorny questions such as China’s government support for sensitive industries, a group of policies that the Trump administration has criticized, and protections for American-created intellectual property. The détente, forged over a dinner between the leaders of the world’s two largest economies, merely postpones a larger reckoning over trade. Under the deal, the United States will postpone an increase in tariffs that were set to be imposed Jan. 1, and it sets a March 1 deadline for the countries to reach a more extensive pact.
Given those unresolved questions, investor enthusiasm may not last. The deal leaves in place American tariffs on $250 billion in Chinese goods and the retaliatory measures enacted by Beijing. It is unclear whether the countries can resolve such thorny questions as the Chinese government’s support for sensitive industries and protections for American-created intellectual property.
“We anticipate that things are still likely to get worse before they get better,” Kerry Craig, global market strategist for the asset management arm of J.P. Morgan, the investment bank, said in an emailed statement. By day’s end in Asia, shares in Shanghai had closed up 2.57 percent, and Hong Kong shares were up 2.55 percent. South Korean shares were up 1.67 percent. In Tokyo, the Topix finished up 1.3 percent, and the Nikkei 225 rose 1 percent.
In early trading in Europe, the Euro Stoxx 50, a measure of European blue-chip companies, was up about 2 percent, as was the CAC 40 in France. The FTSE 100 in Britain rose more than 2 percent, and Germany’s Dax was up almost 2.5 percent.
But given the issues that remain unresolved between China and the United States, investor enthusiasm may be fleeting.
“We anticipate that things are still likely to get worse before they get better,” Kerry Craig, global market strategist for the asset management arm of JPMorgan, said in an emailed statement.
“Small rays of light such as this create tactical opportunities for investors,” he added, “but on balance we would be more cautious on positioning heading into 2019.”“Small rays of light such as this create tactical opportunities for investors,” he added, “but on balance we would be more cautious on positioning heading into 2019.”
Chinese investors were perhaps more cheered in part because the official news media there de-emphasized the temporary nature of the agreement. It also played down continued areas of disagreement, such as intellectual property protections. Chinese investors were perhaps more cheered in part because the official media there de-emphasized the temporary nature of the agreement. It also played down continued areas of disagreement, such as intellectual property protections.
At midday in Asia, shares in Shanghai were up 2.9 percent, while Hong Kong was up 2.7 percent. South Korean shares were up 1.9 percent and Tokyo was up 1.4 percent.