- Global stock markets ripped higher Monday after the US and China agreed to 90-day trade truce.
- All major Chinese indexes were higher by 2.5% or more, while European stocks were seeing similar gains.
- In the US, futures were pointing to 2% gains for all three major share indexes.
- “While bulls seem to be well in control for now, investors need to know that what was achieved is only a short-term relief to markets,” Hussein Sayed, the chief market strategist at FXTM, said.
Global markets were ripping higher Monday morning as investors cheered a thawing of trade relations between the US and China over the weekend.
President Donald Trump and his Chinese counterpart, Xi Jinping, came to a tentative truce on trade at the G20 summit in Buenos Aires, Argentina, postponing an increase in tariffs and agreeing to a 90-day window for further discussions.
The US agreed not to raise the 10% tariff rate on $US200 billion worth of Chinese goods to 25% on January 1, as originally scheduled, while in return China committed to buying a “very substantial amount” of agricultural, energy, and industrial goods from the US.
While the meeting didn’t exactly provide an end to the trade war, the agreement represents a forward step in relations.
By the close of trading in Asia, all major Chinese indexes were higher by more than 2.5%, with the Shenzhen Composite index climbing furthest, ending the day 3.3% in the green.
Stocks also surged in Europe, with most indexes higher by more than 2% just under 30 minutes after markets opened.
Futures markets were pointing to a strong day in North America, with the Nasdaq index set to open higher by as much as 2.7% and both the S&P 500 and the Dow Jones Industrial Average looking likely to gain at least 2%.
Here’s are some of the stock market highlights from across the world:
- Shanghai Composite – up 2.6%
- Hong Kong’s Hang Seng – up 2.5%
- Japan’s Nikkei 225 – up 1%
- Britain’s FTSE 100 – up 2.2%
- Germany’s DAX – up 2.7%
- US futures pointed to the Nasdaq gaining 2.7%, with the S&P 500 and the Dow looking set to open 2% higher.
- Brent crude oil – up 4.7% to $US62.27 a barrel
Elsewhere in markets, oil prices were ripping higher, helped by news of the deal as well as news that Saudi Arabia and Russia extended their agreement to manage the market. Canada’s largest producing province also ordered unprecedented output curbs. OPEC, along with Russia, is expected to announce supply cuts at its meeting on Thursday.
Oil markets shrugged off news on Monday morning that Qatar planned to withdraw from OPEC effective January 1 amid increasing political tensions with its Middle Eastern neighbours.
Analysts urged against overexcitement, however, with most noting that the US-China trade agreement was, at best, a temporary reprieve and did not remove any of the tariffs already in place.
“While bulls seem to be well in control for now, investors need to know that what was achieved is only a short-term relief to markets,” Hussein Sayed, the chief market strategist at FXTM, said in an email.
“Whether this will be translated into longer-term advances depends on the path of negotiations over the next three months. For now, one obstacle has been removed, but all longer-term risks remain there.”
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