Hong Kong (AFP) – Asian equities rallied Wednesday as investors breathed a collective sigh of relief at news the US had delayed tariffs on a swathe of Chinese goods, easing tensions in the countries’ bitter trade war.
Donald Trump also said top-level negotiators for both sides had held “very productive” talks by phone, while an official told AFP the president’s top trade representative would speak again to his opposite number in two weeks.
Trump said the decision was made to protect consumers heading into the holiday shopping season, with 10 percent levies on electronics goods — which were due on September 1 — put off until December 15.
The news provided some much-needed respite for investors, who have come under intense pressure from a range of issues including concerns about the global economy, Hong Kong’s protests, the trade war and Brexit.
Wall Street’s three main indexes surged on the announcement with the tech-rich Nasdaq up two percent, and the Dow and S&P 500 more than one percent higher.
However, National Australia Bank’s Tapas Strickland offered a note of caution.
“Markets have rallied hard on the notion of Trump blinking, but overall a high degree of scepticism should remain and an imminent deal is unlikely given Trump has foreshadowed he is going to be campaigning hard on the issue in the 2020 election,” he said in a note.
Still, the US gains filtered through to Asia where Hong Kong climbed one percent in the morning session.
– Hong Kong bounces –
The gains helped reverse some of the more than two percent lost in the previous two days from concerns about rising political tension that saw the city’s airport — a major international hub — shut down for two days.
The increasingly violent demonstrations have also been referred to as “terrorism” by Beijing, stoking fears China will take a tougher line, with observers still concerned about the outlook for further unrest.
Elsewhere Shanghai added 0.9 percent, Tokyo went into the break 0.6 percent higher and Singapore gained 0.2 percent, Seoul surged 0.9 percent, Sydney put on 0.1 percent and Taipei rallied more than one percent.
High-yielding, riskier currencies also enjoyed some gains with the Mexican peso and South African rand more than one percent higher, South Korea’s won gaining 0.8 percent and the Indonesian rupiah 0.6 percent up.
China’s yuan, which has plunged in the past two weeks on worries about the trade stand-off — sparking accusations Beijing is a currency manipulator — also bounced.
However, gold — a key solace in times of turmoil and uncertainty — only fell slightly, which OANDA Asia-Pacific senior market analyst Jeffrey Halley said was telling.
“Given the stampede out of defensive positioning we saw everywhere else, this performance is doubly impressive and suggests that calmer heads will need a lot more evidence that a collision between the two supertankers of the world economy will be avoided,” he wrote.
Data showing US inflation rising more than expected also tempered hopes for another interest rate cut by the Federal Reserve this year.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.6 percent at 20,584.90 (break)
Hong Kong – Hang Seng: UP 1.0 percent at 25,529.42
Shanghai – Composite: UP 0.9 percent at 2,821.38
Euro/dollar: UP at $1.1176 from $1.1172 at 2115 GMT
Pound/dollar: DOWN at $1.2050 from $1.2060
Euro/pound: UP at 92.73 pence from 92.60 pence
Dollar/yen: DOWN at 106.29 from 106.74 yen
West Texas Intermediate: DOWN 64 cents at $56.46 per barrel
Brent North Sea crude: DOWN 55 cents at $60.75 per barrel
New York – Dow: UP 1.4 percent at 26,279.91 (close)
London – FTSE 100: UP 0.3 percent at 7,250.90 (close)