Nikkei hits 7-week high after China-US truce lifts cyclical stocks

Pedestrians wait to cross a road in front of an electronic stock board outside a securities firm in Tokyo. (Bloomberg pic)

TOKYO: Japan’s Nikkei surged to a seven-week high on Monday morning after the United States and China on the weekend suspended new tariffs and agreed to try reaching a trade deal within 90 days, which lifted global cyclical stocks.

The Nikkei share average soared 1.4% to 22,647.29 in mid-morning trade, after touching 22,677.29, the highest level since Oct 18.

The White House said President Donald Trump told China’s President Xi Jinping at the G20 talks in Argentina that he would not boost tariffs on US$200 billion (RM836 billion) of Chinese goods to 25% on Jan 1, as previously planned.

Japanese cyclical stocks such as those in tech, autos and machinery that have large exposure to the Chinese market outperformed.

Hitachi Ltd and TDK Corp surged 5%, and Toyota Motor Corp advanced 3.5%. Honda Motor added 2%, Fanuc Corp 2.5% and Yaskawa Electric 3.1%.

The US-China truce “is raising investors’ risk appetite especially on stocks that have underperformed lately,” said Yoshinori Shigemi, a global market strategist at JPMorgan Asset Management.

“In the mid-term, there are concerns that new tariffs will start after 90 days, but the market also expects China to come up with a stimulus programme before then.”

Apart from trade, Shigemi said that investors have taken heart from comments by US Federal Reserve Chair Jerome Powell as hinting at a slower pace of rate hikes.

“Investors were concerned about trade and Fed’s policy, so right now with the two major worries receding, the environment is favourable for stocks now,” Shigemi said.

Renesas Electronics, which has deepened a push into semiconductors for self-driving cars, jumped 11%. Nikkei Electronics quoted President Bunsei Kure as saying it will strive to stay on top in the self-driving field.