Asia markets rally as Trump delays China tariffs

Shanghai led a rally across Asian markets Monday after Donald Trump said he would delay a hike in tariffs on Chinese goods citing “substantial progress” in trade talks and fuelling hopes of an end to their long-running stand-off. Optimism over the negotiations had already provided support to global equities, spurring a rally in January and February, but the president’s comments gave extra ammunition to investors to ramp up the buying.

The news also fired currency markets with the yuan extending gains to a seven-month high, while other high-yielding, riskier units were also up against the dollar.

Trump said on Twitter that the US “has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues”.

He added: “As a result of these very productive talks, I will be delaying the US increase in tariffs now scheduled for March 1.”

The president also said he planned to hold a summit with his Chinese counterpart Xi Jinping at his Mar-a-Lago estate in Florida to sign a deal.

China’s Xinhua news agency added that the two sides had “made substantial progress on specific issues” including on transfer of technology, intellectual property and agriculture.

‘Sigh of relief’

In morning trade, Shanghai jumped 2.8% and Hong Kong added 0.4% while Tokyo ended the morning 0.7% higher.

Sydney and Singapore each put on 0.1%, while Seoul was flat, Taipei added 0.4% and Jakarta rose 0.3%.

The gains in Asia followed another positive lead from Wall Street, where the Dow enjoyed its ninth straight weekly gain – the longest streak since May 1995.

“This is a sigh of relief,“ said Ben Emons, managing director for global macro strategy at Medley Global Advisors. “Markets will still keep a level of caution, but this news is encouraging,“ he said.

The upbeat sentiment lifted high-risk currencies, with the yuan hitting its highest level against the dollar since July, while South Korea’s won, the Australian dollar and the Indonesia rupiah were also well up.

Forex traders will be closely watching speeches this week from top Federal Reserve officials – including chairman Jerome Powell’s appearance in front of lawmakers – hoping for clues about the bank’s monetary policy plans.

Wall Street “will be looking for soothing comments about the future size of the balance sheet – the bigger the better – and insights into future rate hikes”, said Jeffrey Halley, senior market analyst at OANDA.