Australian stocks just posted their biggest one-day gain in two years on news the global trade war might ease

(Brian Cleary / Getty Images)
  • The ASX200 rose by 1.84% today – its biggest daily gain since November 10, 2016.
  • Gains were led by energy and resources stocks after the US and China reached a tentative truce on trade.

Positive developments in US-China trade relations have helped spur local stocks to their biggest one-day gain in over two years.

The ASX200 rose by 104 points to close at 5771.20, a gain of 1.84% — the largest increase since a 3.34% rally on November 10, 2016.

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It followed a meeting between President Trump and China’s Xi Jinping at the G20 summit on Saturday, which resulted in a tentative truce and pledges to maintain dialogue over the next 90 days.

“Will there be a deal in 90 days? A few think not — at least we have three months to not be pulled down by continued tariff escalations,” said Bell Potter Securities analyst Richard Coppleson.

Today’s rally follows a strong session for US stocks on Friday night, as the S&P500 capped off its biggest weekly gain in seven years.

And it’s looking like a positive session ahead for US markets, with Dow futures up 1.9% a short time ago.

“From a technical perspective, many will be very happy to see that the S&P500 successfully retested last month’s lows last week, and has bounced around 4% off the lows,” Coppleson said.

Given the Australian resource sector’s exposure to the China, big mining stocks performed strongly.

BHP rose more than 4%, with similar gains for Fortescue while South32 closed more than 7% higher. Rio was up by a little over 2%.

Financial stocks, the other major sector on the local index, posted more modest gains.

NAB and ANZ finished lower while CBA and Westpac were both up by around 0.8%. Shares in the regional banks performed better while Macquarie closed 2.81% higher.

The ASX200 energy sector surged by 4.6%, as oil prices rebounded back above $US60 in Asian trade.

Santos jumped by almost 9% while Origin Energy closed 6.3% higher, and Woodside Petroleum posted a gain of more than 3%.

The buying also extended to Australia’s beleaguered listed retailers, with consumer discretionary stocks up 1.78% while consumer staples rose by 1.6%.

Looking ahead, Coppleson said the US may now try and complete trade deals with other countries to strengthen its bargaining position against China.

“There are some who say this 90 days will allow the US time to now quickly complete deals with the Eurozone, Japan, Australia and India,” he said.

“Once they have done that, the US will use those countries as a block,”, a move which “only strengthens the bargaining position of the US”.

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