Markets extended the previous day’s gains in Asia on Tuesday, with investors turning their attention back to the China-US trade row and a planned meeting between the countries’ leaders later this month.
Donald Trump’s decision to drop threatened tariffs on Mexico after a last-minute immigration deal last week sparked relief across trading floors and led to hope that the row with Beijing could also end with some sort of agreement.
The US president told CNBC on Monday that a meeting had been planned but warned that if Xi did not turn up he would ramp up levies on all Chinese imports.
The gains, which follow another healthy Wall Street performance, are much needed since the US president shocked markets last month by hiking levies on $200 billion of Chinese imports, blaming backsliding over their long-running trade talks.
US-China to Resolve Trade War?
Support is also coming from expectations the Federal Reserve will cut interest rates as soon as next month in response to a string of soft US economic data and concerns about the impact of the China stand-off.
“What continues to grease the wheels of US equity markets and the one constant that keeps the S&P (500) ticking is Federal Reserve free and cheap money, it’s long been an established pattern,” said Stephen Innes at Vanguard Markets.
But OANDA senior market analyst Edward Moya warned that while lower US central bank rates were a major boost, traders were ultimately keen to see the world’s top two economies resolve their trade war.
Donald Trump’s decision to drop threatened tariffs on Mexico after a last-minute immigration deal last week sparked relief across trading floors.
“The recent global stock market rally has stemmed from expectations that the Fed will come to the rescue with a couple of rate cuts this year,” he said in a note. “But that will not likely deliver fresh record highs with the US indexes unless we see a scaling back of tariffs between the US and China.”
In early trade Hong Kong rose 0.7 percent, building on Monday’s more than two percent rally, while Shanghai was up 1.5 percent. Tokyo ended the morning 0.4 percent higher, Sydney climbed 1.3 percent and Singapore put on 0.5 percent while Seoul added 0.3 percent. Wellington was nearly one percent up, with Taipei and Manila both strengthening 0.4 percent.
Focus is now on the expected face-to-face between Trump and Xi Jinping at the G20 in Osaka at the end of June. The US president told CNBC on Monday that a meeting had been planned but warned that if Xi did not turn up he would ramp up levies on all Chinese imports.
Trump-Xi Meeting Possible?
Foreign Ministry spokesperson Geng Shuang did not confirm or deny whether a meeting between US President Donald Trump and Chinese President Xi Jinping will have a bilateral meeting on the sidelines of the G20 Summit in Japan, reported Global Times. Spokesperson Shuang said that China will provide information in “a timely manner”.
Foreign Ministry spokesperson Geng Shuang neither confirmed nor denied a meeting between Chinese President Xi Jinping and US President Donald Trump at the summit in Japan. China will release information "in a timely manner," Geng said. https://t.co/SlgQPahrPr #G20 pic.twitter.com/2NoSUryFk0
— Global Times (@globaltimesnews) June 11, 2019
Jennifer Franco, anchor at the One America News Network, reported that US President Trump has threatened to immediately imposed tariffs worth $300 billion on Chinese imports if the meeting is not scheduled.
Franco tweeted, “Pres. Trump says he will immediately impose additional tariffs on $300 billion worth of Chinese imports if President Xi Jinping doesn’t meet with him at the G20 summit in Japan later this month, as China has refused to confirm a scheduled meeting.”
#NEW: Pres. Trump says he will immediately impose additional tariffs on $300 billion worth of Chinese imports if President Xi Jinping doesn't meet with him at the G20 summit in Japan later this month, as China has refused to confirm a scheduled meeting. #OANN
— Jennifer Franco (@jennfranconews) June 10, 2019
Kayla Tausche, Washington correspondent for CNBC, reported that President Trump is rather confident that the meeting with Chinese President Xi Jinping will “will happen and, so far as he’s heard, it hasn’t been called off.”
NEW: If Pres. Xi does not go to #G20 or does not meet with Pres. Trump there, would that mean the remaining tariffs on Chinese goods go through?
“Yes, it would,” Trump says. But also says he thinks the meeting will happen and, so far as he’s heard, it hasn’t been called off.
— Kayla Tausche (@kaylatausche) June 10, 2019
Oil Price Continue to Soar
While expectations are for an agreement to eventually be made — which would be in the interests of both sides — Ray Attrill, head of forex strategy at NAB, said the “meeting is gearing up to be another major ‘binary’ risk event that should keep markets very edgy in the coming days and weeks”.
The recent global stock market rally has stemmed from expectations that the Fed will come to the rescue with a couple of rate cuts this year,” he said in a note.
Oil prices edged up after Monday’s drop, which came on the back of uncertainties about an agreement between OPEC and other key producers led by Russia to cap output. Innes said the market remains burdened by overproduction and waning demand.
“This is a real fear as with China slowing, the EU sickly and the US data starting to wobble, an economic downturn remains a clear and present danger,” he said. He warned prices could “drop to $40 in a heartbeat” without the OPEC group and Russia agreeing to extend the output cuts.
Figures Observed at 0300 GMT
Tokyo – Nikkei 225: UP 0.4 percent at 21208.09 (break)
Hong Kong – Hang Seng: Up 0.7 percent at 27,768.39
Shanghai – Composite: UP 1.5 percent at 2,894.25
Euro/dollar: DOWN at $1.1312 from $1.1316 at 2040 GMT Friday
Pound/dollar: DOWN at $1.2682 from $1.2686
Dollar/yen: UP at 108.64 yen from 108.49
Oil – West Texas Intermediate: UP 28 cents at $53.54 per barrel
Oil – Brent Crude: UP 10 cents at $62.39 per barrel
New York – Dow: UP 0.3 percent at 26,062.68 (close)
London – FTSE 100: UP 0.6 percent at 7,375.54 (close)
AFP with additional input and research by News Desk.