World shares breathe easy as Trump pushes out tariff deadline

US President Donald Trump, right, and Xi Jinping, China’s president would meet to seal a deal over its ‘productive’ trade talks. (Bloomberg pic)

LONDON: Equity markets across Europe and Asia rose on Monday after US President Donald Trump said he would hold off on hiking tariffs on Chinese imports, buoying hopes of a resolution to a trade war between the world’s two biggest economies.

European stocks climbed 0.4% to their highest since October, led by a 0.5% bump in Germany’s trade-sensitive DAX, where China-exposed sectors from industrials to autos made ground.

Trump said on Sunday he would delay an increase in US tariffs on Chinese goods planned for Mar 1 thanks to “productive” trade talks, adding that he and Chinese President Xi Jinping would meet to seal a deal if progress continued.

The US president cited progress in divisive areas including intellectual property protection, technology transfers, agriculture, services and currency.

Trump’s tweeted remarks are the clearest sign yet that the United States and China are moving towards a deal to end a trade war that has dragged on for months, dragging on global growth and disrupting markets.

The remarks were set to embolden larger, risk-averse investors to make solid moves after weeks of guesswork on the direction of the US-Sino trade talks, analysts said.

“The people sitting on the fence and previously weren’t sure have come out,” said David Madden of CMC Markets.

“We could see a continuation of the upwards move, on a more aggressive rate than we have previously seen it.”

By mid-morning, MSCI’s world equity index, which tracks shares in 47 countries, was up 0.2% to its highest since October.

The risk-on mood in Europe spilt over from Asia, where MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.7% to the highest since October and is up 10% for the year so far.

Chinese blue chips scaled their highest in eight months on the back of a 6% gain, their biggest daily increase since July 2015. They are up nearly a quarter this year.

The Japanese benchmark Nikkei also gaining, climbing half a % to its highest since December.

Patient Powell

US stocks were poised to be lifted, too, with the Dow and Nasdaq well-positioned after nine straight weeks of gains.

A dovish shift from the US Federal Reserve, which has set aside rate hikes for now, has also helped. Fed Chairman Jerome Powell will testify on US monetary policy on Tuesday and Wednesday.

“Expect him to emphasise patience, stating that any more hikes this year would likely require some pickup in inflation,” wrote analysts at TD Securities in a note.

Participants in currency markets shared that sentiment.

“We expect more of the same going forward, with Powell generally supportive of risky assets,” said Adam Cole, chief currency strategist at RBC Market.

“We think the mood of optimism and better bid for risk is probably something we live with for the week.”

The trade news was largely priced into currency markets, with the dollar nudging down 0.1% against a basket of currencies to 96.518 amid the risk-on mood.

The euro ticked up 0.1% against the greenback, trading around US$1.1350, and still within the US$1.1213/1.1570 trading range that has held since mid-October.

Sterling was idling at US$1.3069, with markets awaiting clarity on the direction of Brexit talks.

Britain’s government is considering different options, including possibly delaying Brexit, if parliament fails to approve Prime Minister Theresa May’s deal by March 12.

The British premier on Sunday put off a vote in parliament on her Brexit deal to just 17 days before Britain’s scheduled March 29 departure from the European Union, setting up a showdown this week with lawmakers.

In commodities, oil prices fell, dragged down by plentiful supply as US exports soar and compete with traditional producers from the Middle East in key markets such as Asia.

International Brent crude oil futures were at US$66.99 a barrel, down 0.2% from their last close.