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Trump’s China trade truce extension spurs market rally Trump’s China trade truce extension spurs market rally
(about 8 hours later)
Bourses in Australia and Japan hit record highs as hopes grow of trade deal within latest 90-day pauseBourses in Australia and Japan hit record highs as hopes grow of trade deal within latest 90-day pause
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Donald Trump’s decision to extend a truce in the trade war with China has triggered a stock market rally across the globe. Donald Trump’s decision to extend a truce in the trade war with China for another 90 days triggered a stock market rally across the globe on Tuesday.
On Monday night, the US president signed an executive order extending the deadline for higher tariffs on China until 10 November. Beijing said early on Tuesday it would suspend additional tariffs on US goods for a further 90 days. The US president signed an executive order on Monday night extending the deadline for higher tariffs on China until 10 November and avoid a rates cliff edge. Beijing responded the following morning it would suspend additional tariffs on US goods for a further 90 days.
In response, markets in Japan and Australia hit record highs on Tuesday, as expectations grow that the US and China could secure a trade agreement before the end of another 90-day pause on additional tariffs. Trump had previously threatened to put tariff rates as high as 245% on Chinese imports into the US after the deadline passed, while Beijing had threatened retaliatory tariffs of 125%.
Tokyo’s Nikkei share index rose by as much as 2.5% to 42,867.69 points on Tuesday, while the Australian ASX 200 index was up by 0.14%, reaching a high of 8,828,67. Its momentum was helped by the Reserve Bank of Australia cutting its main interest rate to a two-year low of 3.6%. In response to the reprieve, markets in Japan and Australia hit record highs on Tuesday, as expectations grew that Washington and Beijing could secure a trade agreement during the fresh hiatus, which extends current baseline rates of 30% on Chinese goods into the US and 10% on American products going the other way.
Tokyo’s Nikkei share index 2.5% to 42,867.69 points on Tuesday, while the Australian ASX 200 index closed up 0.41%, to a new high of 8,880. Its momentum was helped by the Reserve Bank of Australia cutting its main interest rate to a two-year low of 3.6%.
In China, the Shanghai composite index rose by 0.5%. Hong Kong’s Hang Seng index remained broadly flat.In China, the Shanghai composite index rose by 0.5%. Hong Kong’s Hang Seng index remained broadly flat.
Stock markets in Europe also opened higher on Tuesday morning. In the UK, the FTSE 100 index of blue-chip multinationals rose 0.4% in early trading, with the more domestic FTSE 250 index also up by 0.4%. Stock markets in Europe also opened higher on Tuesday morning. In the UK, the FTSE 100 index of blue-chip multinationals closed, with the more domestic FTSE 250 index also up by 0.4%.
In Germany, the Dax 40 index nudged up 0.3%, while the French Cac 40 rose 0.5%. The Stoxx Europe 600 index, which tracks the biggest companies on the continent, was up by 0.4%.In Germany, the Dax 40 index nudged up 0.3%, while the French Cac 40 rose 0.5%. The Stoxx Europe 600 index, which tracks the biggest companies on the continent, was up by 0.4%.
Investors are hoping that negotiators will be able to secure a trade deal during the pause on additional tariffs. Trump has previously threatened tariff rates as high as 245% on Chinese imports, while Beijing has threatened retaliatory tariffs of 125%. Meanwhile in the US, markets were also up, helped by better-than-expected inflation data. The S&P 500 rose 0.9% in early trading and was on track to top its all-time high set two weeks ago, while the Dow was up 1% and the tech-focused Nasdaq climbed 1.1% and was also heading toward a record.
Under current rules, US exports to China are subject to rates of about 30%, with imports from China subject to a baseline tariff of 10%, as well as a 20% extra tariff related to fentanyl smuggling allegations against China. US exports to China are subject to tariffs of about 30%.
Economists have warned that Trump’s trade war regime, especially against China, could seriously damage the global economic outlook, as it could lead to higher costs, disrupt supply chains and reduce international trade.Economists have warned that Trump’s trade war regime, especially against China, could seriously damage the global economic outlook, as it could lead to higher costs, disrupt supply chains and reduce international trade.
Mark Haefele, of the Swiss bank UBS, said the trade truce represented “an encouraging step toward finding an agreement between Washington and Beijing that would avoid a significant disruption in global trade flows”.Mark Haefele, of the Swiss bank UBS, said the trade truce represented “an encouraging step toward finding an agreement between Washington and Beijing that would avoid a significant disruption in global trade flows”.
“We think the additional time could yield concessions from both sides on several unresolved issues, including fentanyl flows, rare-earth controls, tech export curbs, and Russian oil purchase,” he said.“We think the additional time could yield concessions from both sides on several unresolved issues, including fentanyl flows, rare-earth controls, tech export curbs, and Russian oil purchase,” he said.
Oil prices also rose on Tuesday amid hopes the trade war could de-escalate. Brent crude futures rose by 0.4% to $66.90 a barrel, while US West Texas Intermediate crude futures rose by 0.4% to $64.20.Oil prices also rose on Tuesday amid hopes the trade war could de-escalate. Brent crude futures rose by 0.4% to $66.90 a barrel, while US West Texas Intermediate crude futures rose by 0.4% to $64.20.
In the US, futures for the S&P 500 were up by 0.1%. Jim Reid, of Deutsche Bank, said investors on Wall Street would be watching closely how tariffs were filtering through to consumer prices.
The US will report its official inflation figures for July on Tuesday afternoon. Reid said the bank’s US economists expected the consumer price index (CPI) to increase to 3%.
In June, core CPI, which strips out energy and food prices, rose to 2.9%, up from 2.8% in May. The prices of appliances, furniture and toys, products typically manufactured outside the US, all rose.