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Markets Applaud Talk of U.S.-China Trade Deal

By Yang Ge / Dec 13, 2019 02:22 PM / World

Photo: VCG

Photo: VCG

It was all smiles in China’s financial markets on Friday as investors applauded reports that the country has reached the first phase of a trade deal with the U.S. that could see de-escalation in tensions from their prolonged trade war. Bloomberg reported that Trump had signed off on such a deal, which would see the roll-back of some of the tit-for-tat tariffs from a clash that began well over a year ago.

No official announcement was forthcoming from either side, but that didn’t stop investors from buying into stocks on both the Chinese mainland and in Hong Kong, and boosting the Chinese currency the yuan to highs not seen for months.

Midway through the trading day, the main composite indexes in Shenzhen and Shanghai were up more than 1.2%. Hong Kong’s Hang Seng Index, which tracks sentiment towards China by international investors, was up by an even stronger 2%.

Meantime, the yuan also rallied to its strongest levels in four months on optimism about the potential for trade to improve between the world’s two largest economies with the removal of some previously imposed punitive tariffs. The onshore rate advanced as much as 1% to 6.9570 per dollar Friday, the strongest since Aug. 2 on an intraday basis.

Oil also took part, rising to its highest level in almost three months. Oil futures in New York rose by as much as 0.7% Friday after a similar climb the previous day.

Last but far from least was the modest soybean, which has been one of the biggest victims of the trade war as Chinese buying of the commodity from the U.S. plummeted at the height of tensions. November soybean futures jumped 1.4% to a three-month high of $9.36 a bushel in Chicago, while December corn futures rose an even stronger 4.6%.

“On U.S.-China trade, the news is certainly a positive for markets,” said UBS’ chief investment officer of wealth management. “But to make a full assessment we need more clarity on the timing, substance, and a confirmation.”

Contact reporter Yang Ge (geyang@caixin.com; twitter: @youngchinabiz https://twitter.com/youngchinabiz)

Related: Trump Says Deal With China Is Getting ‘Very Close’


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