LONDON: Stock markets across the world sprang higher Tuesday following a conciliatory speech by Chinese President Xi Jinping that reassured investors a trade war with the United States could be avoided.
Following boosts to stock market indices across Asia and Europe, US benchmarks also shot higher, with the Dow up more than two percent approaching midday.
“US stocks are higher in early action, with trade war concerns being tamped down by a conciliatory speech from Chinese President Xi, though uncertainty toward the White House continues to fester,” Charles Schwab analysts said in a note.
Xi, in a speech at the Boao Forum, pledged on Tuesday to lower tariffs on auto imports this year and take other steps to open the world’s number two economy “wider and wider,” addressing major complaints by the United States in an escalating trade row.
The comments follow a series of tit-for-tat threats by the US and China to impose retaliatory tariffs on one another that have rattled markets in recent weeks.
Dealers pounced on the comments as a sign that a possible trade war between the world’s top two superpowers can be averted, after weeks of nail-biting uncertainty.
“Xi cautioned against a cold war mentality and stated the China should push for free trade and uphold a multilateral trading system,” wrote David Cheetham, chief market analyst at XTB.
“Rising tensions on trade between the two largest economies in the world have weighed on markets in recent weeks, but it should be remembered that the implementation of tariffs is yet to be finalised, and the comments from Xi seem to suggest that he is keen to avoid any further escalation.”
Investor sentiment has been rocked in recent weeks as the White House has announced a series of tariffs, mostly on Chinese goods, as part of Donald Trump’s America First protectionist agenda, fuelling fears the world’s top two economies could impose measures that would hammer the global economy.
China’s massive surplus with the US is a key complaint of Trump who accuses the country of unfair trade practices that hurt American jobs.
In addition to the auto sector, Xi also said he would move to protect intellectual property — another area high on the list of demands by Washington.
“Xi has succeeded in batting the ball back into the US court, so we now watch and wait for a response,” said IG analyst Chris Beauchamp.
“A firm negative (response) will send equities tumbling back down, but if Mr Trump nods his approval of this first step towards negotiation, we might see stock markets edge up once more.”
The one exception to rising indices has been the Russian stock market, which has taken a hammering following the introduction of US sanctions targeting oligarchs close to President Vladimir Putin.
US sanctions have meanwhile buoyed oil prices, which extended Monday’s rally.
“Driven primarily by psychological factors, the price surge is due to fears of supply tightening as a result of US sanctions,” Commerzbank Commodity Research said in a note.
“We regard such fears as exaggerated, in the case of both Iran and Russia. OPEC exports are likely to remain fairly stable even if US sanctions are resumed.”
– Key figures around 1530 GMT –
New York – Dow: UP 2.1 percent at 24,473.54 points
London – FTSE 100: UP 1.0 percent at 7,266.75 (close)
Frankfurt – DAX 30: UP 1.1 percent at 12,397.32 (close)
Paris – CAC 40: UP 0.8 percent at 5,307.56 (close)
EURO STOXX 50: UP 0.7 percent at 3,439.37
Tokyo – Nikkei 225: UP 0.5 percent at 21,794.32 (close)
Hong Kong – Hang Seng: UP 1.7 percent at 30,728.74 (close)
Shanghai – Composite: UP 1.7 percent at 3,190.32 (close)
Euro/dollar: UP $1.2335 from $1.2321 at 2100 GMT on Monday
Dollar/yen: UP at 107.40 yen from 106.77
Pound/dollar: UP at $1.4162 from $1.4131
Oil – Brent North Sea: UP $2.05 at $70.70 per barrel
Oil – West Texas Intermediate: UP $1.85 at $65.27
Source: Brecorder
