Global equity markets soared Monday after China and the United States clinched a trade war truce, while oil prices surged on expectations of a big production cut.
In midday deals, Frankfurt stocks were rebounding strongly, up 2.3 percent. London charged 2.0 percent higher and Paris gained 1.2 percent.
European traders took their cue from Asia, where Hong Kong and Shanghai kicked off the week strongly.
“Global stocks are starting the week in impressive fashion, with news of a breakthrough in talks between the US and China providing a boost,” said IG analyst Joshua Mahony.
In a much-anticipated meeting between Donald Trump and Xi Jinping at the weekend, the heads of the world’s two biggest economies hammered out a deal that will see them hold off on their tit-for-tat tariffs row, which has roiled global equities for most of this year.
– Temporary truce –
The US will not raise levies on Chinese goods on January 1 while China promised to buy more from the US and enter a 90-day period of talks to bring an end to the dispute.
If the negotiations fail, the US tariffs will jump from 10 percent now to 25 percent.
“Stocks markets are trading heavily in the green across the globe as a temporary truce in the trade war between the US and China buoyed investors,” said Oanda analyst Craig Erlam.
The Trump-Xi meeting “generated as good a result as we could have realistically hoped for.”
Trump hailed the meeting — held on the sidelines of the G20 in Buenos Aires — as “amazing and productive… with unlimited possibilities for both the United States and China”.
The US president later added that Beijing had also agreed to cut tariffs on car imports.
“China has agreed to reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40 percent,” he wrote on Twitter.
News of Saturday’s deal lit a fuse under Asian markets, with Hong Kong and Shanghai each rallying 2.6 percent, while the Chinese yuan — which has tumbled this year on worries about the trade row — jumped 0.8 percent.
– Oil rebounds –
The news energised oil prices, which have been battered by concerns the trade war would hit demand for the commodity.
Adding to the buying support was President Vladimir Putin saying Saturday that Russia and Saudi Arabia had agreed to renew a pact on production cuts.
Both main contracts climbed around five percent, which provided a boost to regional energy firms — PetroChina was up more than four percent in Hong Kong and Woodside Petroleum up 3.5 percent in Sydney.
Traders are now looking ahead to a weekend meeting of OPEC and key non-OPEC members, where they are expected to announce how much they will cut and for how long.
Price gains were pared slightly after Qatar announced it would be leaving OPEC next year as it looks to concentrate on its gas production, though it would continue to pump crude. The country contributes a fraction of cartel’s output but the move may have wider political implicatons given Doha’s tense relations with Riyadh.
– Key figures around 1200 GMT –
London – FTSE 100: UP 2.0 percent at 7,117.56 points
Frankfurt – DAX 30: UP 2.3 percent at 11,512.11
Paris – CAC 40: UP 1.2 percent at 5,064.42
Milan – FTSE MIB – UP 2.0 percent at 19,572.95
EURO STOXX 50: UP 1.8 percent at 3,231.30
Tokyo – Nikkei 225: UP 1.0 percent at 22,574.76 (close)
Hong Kong – Hang Seng: UP 2.6 percent at 27,182.04(close)
Shanghai – Composite: UP 2.6 percent at 2,654.80 (close)
New York – Dow Jones: UP 0.8 percent at 25,538.46 (close Friday)
Oil – West Texas Intermediate: UP $2.17 at $53.10 per barrel
Oil – Brent Crude: UP $2.30 at $61.76
Euro/dollar: UP at $1.1333 from $1.1317
Dollar/yen: UP at 113.58 yen from 113.57
Pound/dollar: DOWN at $1.2721 from $1.2749 at 2200 GMT
Latest posts by S. Jack Heffernan Ph.D (see all)
- Asian Market Update - October 25, 2019
- American Airlines Up, Evidence the Trump Economy is Strong - October 24, 2019
- Google Under Siege in France - October 24, 2019