HONG KONG: Asian markets rallied today after US President Donald Trump hailed “very good” phone talks with China’s President Xi Jinping and said they would meet at the Group of 20 (G20) summit next week, renewing hopes for a deal to end a bruising trade war.
Trump’s comments provided a much-needed boost to investors after a month of volatility sparked by his shock decision to hit China with fresh tariffs, ending months of apparently positive negotiations.
Adding to the upbeat mood were comments from the European Central Bank head Mario Draghi hinting at a cut in interest rates to support the stuttering eurozone economy.
The Federal Reserve was also due to end its latest policy meeting later today, with dealers hoping for some idea about its plans for rates.
After a healthy lead from Wall Street, the vast majority of Asia’s markets posted gains of at least 1% – with Hong Kong leading the way by jumping more than 2%.
Tokyo ended 1.7% higher, Shanghai added 1%, Singapore put on 1.4% and Sydney 1.2%.
Taipei added 2%, while Wellington, Seoul, Manila, Jakarta and Bangkok were above the 1% level. Mumbai was also in positive territory.
In Europe, stock markets steadied this morning after the previous session’s strong rally, as investors await a key monetary policy update from the Federal Reserve.
At around 1030 GMT, London’s FTSE 100 was down 0.3%, Frankfurt’s DAX 30 was up 0.1% and Paris’ CAC 40 was 0.1% higher. The Euro Stoxx 50 was flat.
“European markets are taking a breather in the wake of yesterday’s huge gains across the globe,” noted Joshua Mahony, senior market analyst at IG trading group.
The Asian rally was sparked after Trump tweeted: “Had a very good telephone conversation with Xi. We will be having an extended meeting next week at the G20 in Japan. Our respective teams will begin talks prior to our meeting.”
Later he told reporters “the meeting might very well go well”, adding that China wanted to make a deal.
“China and the US will both gain by cooperating and lose by fighting,” Xi told Trump, according to a readout by Chinese state broadcaster CCTV.
Trump’s tweet followed weeks of speculation about whether the heads of the two most powerful economies would actually meet on the sidelines of the G20 in Osaka. Trump had warned that if Xi did not turn up he would increase tariffs on virtually all China’s exports to the US.
However, analysts pointed out that it was in both of their interests to bring an end to the long-running dispute.
“There is strong incentive for both presidents to re-engage,” said Tai Hui, chief market strategist for Asia-Pacific at JPMorgan Asset Management.
“Trump is kick-starting his (re-election) campaign and he will need strong economic performance over the next 18 months. President Xi will also need trade tensions to cool down to support China’s domestic economy, while pursuing financial market liberalisation.”
The optimism underpinned a rally in riskier assets, with high-yielding currencies benefiting. South Korea’s won jumped 0.8%, the South African rand added 0.9% and Indonesia’s rupiah gained 0.4%.
The Chinese yuan, which has struggled in recent weeks, climbed 0.4%.
The euro, however, extended Tuesday’s losses after Draghi’s remarks that weak growth and soft inflation could lead to further rate cuts to historic lows.
He also batted back an accusation from Trump of currency manipulation, saying the ECB’s mandate “is price stability”.
