Markets rise on hopes of US-China trade deal

Investors cautiously optimistic two sides will be able to iron out dispute

The automated Yangshan Deep-Water Port in Shanghai. China warned yesterday that talks with the US were impossible under current conditions, amid fears of a US-China trade war
The automated Yangshan Deep-Water Port in Shanghai. China warned yesterday that talks with the US were impossible under current conditions, amid fears of a US-China trade war
Image: AFP

China said yesterday trade talks with the United States were impossible under current conditions after President Donald Trump tweeted that he saw an end to the dispute.

“Up to now, Chinese and US officials have not held any negotiations on the trade dispute,” foreign ministry spokesman Geng Shuang said.

“Under the current conditions, it is impossible for the two sides to have any negotiations on this issue.”

Asian markets rose earlier in the day as fears about a potentially catastrophic China-US trade war were tempered by hopes the two sides would be able to hammer out an agreement.

On Friday, Trump had warned of tariffs on an additional $100-billion (R1.2-billion) worth of Chinese imports, to which Beijing responded by saying it would stand firm.

But on Sunday he seemed to back off, tweeting that he saw an end to the dispute.

“China will take down its trade barriers because it is the right thing to do,” he wrote.

However, top adviser Larry Kudlow, who has often suggested the tariffs might not go into effect, warned on Friday the announcements were not negotiating tactics.

US Treasury Secretary Steven Mnuchin said the White House hoped to negotiate but acknowledged a trade war was a possibility.

Meanwhile, world markets rose yesterday as fears of a China-US trade war were offset by hopes the two sides would be able to come to an understanding, dealers said.

Asian and European equities rebounded somewhat, despite heavy pre-weekend losses on Wall Street, as trade war fears gave way to investor optimism – but doubts remain.

“European markets are in a more optimistic mood today, with the focus shifting towards a more constructive end to the US-China standoff,” analyst Joshua Mahony at trading group IG said yesterday.

“However, recent weeks have shown us that volatility is likely to remain a key part of the trading landscape, with daily shifts in tone from the US and China driving huge swings in stocks of late.”

US stocks had plunged on Friday after Trump’s warning of tariffs on additional Chinese imports, and Beijing’s firm response.

Trump’s announcement came weeks after his decision to tax imports of steel and aluminium, followed by planned levies on $50-billion (R604-billion) worth of goods from China over what Washington said is theft of intellectual property and technology.

China retaliated by unveiling planned levies on $50-billion worth of major US exports.

Trump’s moves, part of his protectionist America First agenda, have rattled world markets, fearing a trade war between the world’s top two economies could reverse the tentative global recovery.

“Much ink has been spilt over trade wars in the last few days, and we now wait to see what the Trump administration does next,” Stephen Innes, Asia Pacific forex trading head at OANDA, said.

There are still hopes that Trump’s headline-grabbing tariffs are part of a plan to take a harsh line as a bargaining tactic towards a deal with China.

All three main indexes on Wall Street ended more than 2% down on Friday.

Investors will be keeping a close eye on comments today by Chinese President Xi Jinping at the Boao Forum – dubbed the Asian Davos – to see if he comments on the brewing row.

Meanwhile, a report showed on Friday that the US economy created far fewer jobs than expected last month, dimming expectations of sharp interest rate rises by the Federal Reserve.

Markets tanked in February on worries a stronger economy and rising inflation would prompt the central bank to raise rates more than initially thought, bringing an end to years of crisis-era stimulus.

Fed boss Jerome Powell signalled it still planned to press ahead with additional increases this year but did not provide a timeline or idea about the number of increases.

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