Stocks worldwide are stepping higher Monday, following signs of easing in U.S.-China trade tensions.
Treasury Secretary Steven Mnuchin said Sunday that the Trump administration would “put the trade war on hold,” and delay tariffs on Chinese imports to the U.S., while the two countries hammer out details of a deal to reduce the trade deficit with China.
At the end of trade negotiations this weekend, China agreed to buy larger amounts of U.S. goods to help narrow the deficit, but did not agree to the specific U.S. target of $200 billion. China is estimated to have a $375 billion annual trade surplus with the U.S.
U.S. Trade Representative Robert Lighthizer seemed to contradict Mnuchin[1], but markets largely appear focused on the Treasury secretary’s remarks.
Equities in the U.S.[2] ESM8, +0.55%[3] YMM8, +0.85%[4] , Europe[5] SXXP, +0.36%[6] and Asia[7] SHCOMP, +0.64%[8] look on track for up days, while gold futures GCM8, -0.65%[9] and other safety plays take it on the chin.
Below are some of the initial reactions from analysts.
• “Clearly we should ignore the fact that Mnuchin is admitting that there is actually a trade war in the first place and instead look on the happy side of this. ... Market reaction has been very risk-positive and dollar-positive, driving Treasury yields back higher, gold into retreat, equity markets higher and the dollar also stronger.”
“Ultimately, the proof is in the pudding over reduction of the deficit, whilst U.S. concerns over intellectual property and cyber security are yet to be met. However, it is clearly a step in the right direction, and markets are responding.” — Richard Perry, Hantec Markets analyst, in a note.[10]
• “The Chinese Communist party mouthpiece Xinhua declared the development as a ‘good example of win-win.’ Energy futures are bid on the news and should drag the broader commodity futures complex (and commodity currencies) higher in the short-term. We are long SGD/JPY this week on the back of this news.” — Sue Trinh, RBC’s head of Asia foreign-exchange strategy, in a note (referring to the Singapore dollar vs. the Japanese yen ...