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Asian Markets Rally as US-China Trade War Worries Ease

Asian markets rallied on Monday as investors’ worries eased on the outcome of negotiations between the United States and China that put a trade war on hold.

“Sunday’s declaration by US Treasury Secretary Mnuchin that the US-China trade war is ‘on hold’ is a welcome boost to risk appetite that should help equities,” said Sean Callow, strategist at Westpac.

tall buildings and roads below in beijing, china
The US and China agreed not to impost tariffs and put trade war on hold.

In Japan, Nikkei 225 closed higher by 31%, or 72.01 points, to 23,002.37. It breached the 23,000 mark for the 1st time since February as the dollar strengthened against the yen. On the other hand, the Topix closed lower by 0.08%. Declines were seen in insurers and steelmakers while machinery sector stocks advanced.

South Korea’s Kospi recovered early losses as it climbed 0.2% to finish at 2,465.57.

Further, positive trade developments at the weekend supported Asian markets in greater China. Hong Kong’s Hang Seng Index gained 0.60% to close at 31,234.35, but was below its intraday high. Utilities and industrials led the rise ahead of the market close.

For the Asian markets on mainland, the Shanghai composite rose 0.64% to close at 3,213.84. The Shenzhen composite advanced 0.87% to finish at 10,765.35. In addition, logistics firms were supported as US-China trade worries eased.

However, Australia’s S&P/ASX 200 closed lower by 0.05% to 6,084.50, with materials and financials lead losses.

Asian Markets got support from putting Trade Wars “on hold”

The US and China concluded their two days of negotiations with an agreement not to impose tariffs on each other. Secretary Mnuchin said the 2 countries have made “meaningful progress”. The US also has agreed to put on hold proposed tariffs on $150 billion in Chinese products.

Additionally, China said it will “significantly increase” its purchase of American goods and services.

“This is likely to send Asian markets higher as risk sentiment was somewhat subdued on Friday when markets stayed cautious amid China and the US trade talks,” said Mizuho Bank.

“Overall, markets should view this positively at the open this week, but will continue to be attentive to further developments,” ANZ analysts said.

Despite Mnuchin’s announcement was an incremental positive, there were also other moving parts at play in markets, said Jonathan Garner, chief Asia and emerging markets equity strategist at Morgan Stanley.

Higher oil prices were “negative for most of Asia, which is a large oil importer,” said Garner. “We also have a situation where monetary policy continues to tighten in the US and China simultaneously, and that’s an issue that’s certainly causing pressure on valuations, particularly in equities.”

Meanwhile, US stock index futures were higher on Monday after the announcement. Dow futures gained 208 points, suggesting a higher implied open of 220 points. The Nasdaq and S&P 500 futures also indicated an upbeat start to the session for their respective markets.



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