Stocks surge on Sino-U.S. trade deal hopes
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.3%
Asian stocks soared and the dollar meandered on Monday as signs of easing trade tensions between China and the U.S. buoyed risk appetite, in a strong start to a week that will be headlined by central bank meetings and megacap earnings.
Top Chinese and U.S. economic officials hashed out on Sunday the framework of a trade deal for Chinese President Xi Jinping and his U.S. counterpart Donald Trump to decide on later this week in their meeting in South Korea.
A trade deal would pause Chinese rare earths export controls and steeper American tariffs, helping soothe investor nerves that were frayed due to escalating trade tensions between the world’s top two economies.
That sent stocks sharply higher, with KOSPI and Nikkei adding more than 2% each and crossing landmarks to record highs. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.3%.
Investors will want to see confirmation that the trade truce holds and that China’s stimulus and reform signals translate into tangible growth momentum, said Charu Chanana, chief investment strategist at Saxo.
U.S. stock futures climbed, with Nasdaq futures up 0.88%. European futures were 0.5% higher. The Nikkei breached 50,000 for the first time while the Kospi rose above 4,000.
The Australian dollar, often seen as a risk and China proxy, jumped 0.42% to $0.6541, near a two-week high. Chinese shares opened higher, with blue-chip stocks gaining 0.84%. Hang Seng added 0.78%.
Safe-haven gold dropped 1% on trade deal hopes, while U.S. Treasuries dropped, leaving the 10-year bond yield up 2.9 basis points. Commodities soared on trade deal prospects.
Chris Weston, head of research at Pepperstone, said markets had largely viewed a trade deal as the higher-probability outcome, so the news will not come as a major surprise and is partly priced in.
That said, relief buying could still put upside risk into risk-sensitive assets through the trading week, Weston said.
Investor focus this week will also be on central bank meetings in Japan, Canada, Europe and the U.S.
The dollar was little changed at 152.93 yen, hovering near a two-week high. The euro last bought $1.1635. The dollar index dropped 0.1% at 98.824 in early trading.