HONG KONG, Dec 3, 2018 (BSS/AFP) – Hong Kong and Shanghai led a surge
across Asian markets Monday after the United States agreed to suspend
imposing tariffs on China for three months, while oil prices soared on
expectations of a big production cut.
In a much-anticipated meeting between Donald Trump and Xi Jinping at the
weekend, the heads of the world’s two biggest economies hammered out a deal
that will see them hold off on their tit-for-tat tariffs row, which has
roiled global equities for most of the year.
The US will hold off raising levies on Chinese goods on January 1 while
China promised to buy more from the US and enter a 90-day period of talks to
bring an end to the dispute.
If the negotiations, fail tariffs will jump from 10 percent now to 25
percent.
Trump hailed the meeting — held on the sidelines of the G20 in Buenos
Aires — as “amazing and productive… with unlimited possibilities for both
the United States and China”.
The news lit a fuse under Asian markets, with Hong Kong and Shanghai each
rallying more than two percent, while the Chinese yuan, which has tumbled
this year on worries about the trade row, jumped.
Tokyo climbed 1.4 percent by the break, Sydney and Seoul each rose 1.6
percent, Singapore was 1.9 percent higher and Taipei piled on two percent.
“This is the best outcome that we had hoped for out of this meeting,” said
Frances Cheung, head of Asia macro strategy at Westpac Banking Corp.
– Oil prices surge –
However, while the early reaction was positive, observers warned there
were still major issues that need to be resolved.
The “imposition of no new tariffs is not the same as retracing the
existing tariffs that have come into play this year and will gradually have
an impact on the US economy”, said Kerry Craig, global market strategist at
JP Morgan Asset Management.
“Moreover, the ideology behind the trade tensions is still about strategic
positioning of the two economies, which means until issues around technology
transfer and (intellectual property) are resolved, nerves will persist.
“We anticipate that things are still likely to get worse before they get
better, and that the negative sentiment impact created by the trade narrative
will create additional market volatility.”
The news also provided a boost to oil prices, which have been battered by
concerns the trade war would hit demand for the commodity.
Adding to the buying support was President Vladimir Putin saying Saturday
that Russia and Saudi Arabia had agreed to renew a pact on production cuts.
Both main contracts climbed more than four percent, which provided a boost
to regional energy firms with PetroChina up more than three percent in Hong
Kong and Woodside Petroleum up a similar amount in Sydney.
Traders are now looking ahead to a weekend meeting of OPEC and key non-
OPEC members, where they will make an announcement on how much they will cut
and for how long.
“It’s a huge week not only for oil markets but capital markets in
general,” said Stephen Innes, head of Asia-Pacific trade at OANDA.
“Post-G20 sentiment is a bit more positive than expected but still very
much work in progress, so perhaps the most crucial event in December next to
(Britain’s) Brexit vote could very well be the OPEC summit.”
The upbeat sentiment sent higher-yielding and emerging market currencies
higher against the dollar. The Mexican peso was more than one percent higher,
South Korea’s won jumped 0.5 percent, the South African rand climbed 0.8
percent and the Australian dollar put on 0.8 percent.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.4 percent at 22,665.97 (break)
Hong Kong – Hang Seng: UP 2.6 percent at 27,185.66
Shanghai – Composite: UP 2.3 percent at 2,647.13
Oil – West Texas Intermediate: UP $2.27 at $53.20 per barrel
Oil – Brent Crude: UP $2.44 at $61.90 per barrel
Euro/dollar: UP at $1.1343 from $1.1300 at 2200 GMT Friday
Dollar/yen: UP at 113.60 yen from 113.54
Pound/dollar: DOWN at $1.2764 from $1.2800
New York – Dow Jones: UP 0.8 percent at 25,538.46 (close)
London – FTSE 100: DOWN 0.8 percent at 6,980.24 (close)