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Equity markets jump as Trump hints at trade breakthrough

AFP, Reuters/ London

Thursday، 10 October 2019 10:20 PM

Global stock markets rose yesterday, jolted into action by a Donald Trump tweet offering a glimmer of hope for quick success in US-China trade talks, traders said.
London’s FTSE 100 closed 0.3% up at 7,186.36 points, Paris’ CAC 40 ended 1.3% higher at 5,569.05 points and Frankfurt’s DAX 30 added 0.6% at 12,164.20 points, while the EURO STOXX 50 gained 0.9% at 3,493.96 points.
The US president said he would today meet with China’s trade envoy who had been expected to leave town yesterday, they said.
“Earlier reports that he would leave this evening were taken to suggest no agreement would be reached but this goes against that school of thought and is clearly buoying sentiment,” said David Cheetham at XTB.com.
This “hinted at a possible market-friendly outcome to the latest round of meetings between the world’s two largest economies”, he said.
European stock markets, which had been going nowhere until the President took to Twitter, all closed higher in response.
On Wall Street, the Dow Jones index was also well in the green by the late New York morning.
“US stocks have turned higher, with optimism of some sort of progress on the trade front appearing to resurface,” said analysts at Charles Schwab.
Investors had been broadly upbeat in recent weeks that the meeting in Washington would see at least some progress.
But then Hong Kong’s South China Morning Post reported pre-meeting discussions had not made any progress in key areas that the meet would be cut in half to just one day.
The oil price recovered as hopes for a trade deal also boosted the outlook for economic growth, and therefore demand for crude.
Meanwhile, in foreign exchange markets, the pound spiked after British Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar said they could see a route towards striking a possible Brexit divorce deal, following a crunch meeting yesterday.
“Both continue to believe a deal is in everybody’s interest. They agreed that they could see a pathway to a possible deal,” the pair said in a joint statement.
Market participants saw the statement as surprisingly confident, and some felt it could be pointing to a real chance that a no-deal Brexit, the nemesis of financial markets, could yet be avoided.
“The announcement is decidedly upbeat in its tone and while it stops well short of suggesting a deal is imminent it has been warmly welcomed in the markets,” said XTB’s Cheetham.
There is still a lot of uncertainty ahead, independent economist Julian Jessop told AFP.
But “markets clearly think a deal is potentially back on again, boosting sterling”, he said.
Minister-level trade talks between the United States and China are set to resume for the first time since July as they attempt to end a 15-month trade war that has hurt global growth and dented business confidence.
“I think the worst thing any investor can do right now is to second guess these political events,” said Russ Mould, investment director at brokerage AJ Bell, adding that China was “playing a patient game.”
In the latest turn of events, China urged the United States yesterday to stop unreasonable pressure on Chinese companies, including Huawei Technologies.
The South China Morning Post has reported that the two-day negotiations could be cut short by a day while Bloomberg said late on Wednesday that the United States was weighing a currency pact with China as part of a partial deal.
Without significant progress, the next round of US tariff hikes on $250bn worth of Chinese goods will take effect on October 15.
Dutch health technology company Philips lost 8.1% as the firm said it would miss its 2019 target for profit margin improvement because of trade tariffs and poor results at its Connected Care arm.

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