Stocks in Asia trade higher after US and China postpone tariff escalation

  • Stocks in China, Hong Kong, Australia, Japan and South Korea gained in morning trade.
  • The Caixin Manufacturing PMI for November came in slightly above expectations, growing marginally from October.
  • Over the weekend, Chinese President Xi Jinping and U.S. President Donald Trump agreed to a temporary pause on escalating the ongoing trade war between the two economic powerhouses.

Stocks in Asia traded higher Monday morning after Presidents Donald Trump and Xi Jinping agreed to a temporary trade truce between the United States and China.

The mainland Chinese markets, closely watched as a result of Beijing’s ongoing trade spat with Washington, saw strong gains in early trade. The Shanghai composite gained 2.3 percent while the Shenzhen composite advanced nearly 3 percent.

The moves came following a new reading on economic activity in China, the Caixin Manufacturing Purchasing Managers’ Index for November, which showed factory activity grew slightly in November compared to the previous month.

The Caixin/Markit Manufacturing Purchasing Managers’ Index for November rose to 50.2 from 50.1 in October. Economists polled by Reuters had forecast a reading of 50.0, the level that separates expansion from contraction.

Meanwhile, Hong Kong’s Hang Seng index also jumped 2.5 percent.

Japan’s Nikkei 225 rose 1.28 percent in morning trade while the Topix index advanced 1.40 percent. In South Korea, the Kospi gained 1.63 percent.

Over in Australia, the ASX 200 jumped 1.60 percent in afternoon trade with almost all sectors in positive territory. Shares of major miners saw strong gains: Rio Tinto advanced 1.98 percent, Fortescue Metals Group surged 5.25 percent while BHP Billiton gained 3.26 percent.

NIKKEI Nikkei 225 Index 22665.97
314.91 1.41%
HSI Hang Seng Index 27228.11
721.36 2.72%
ASX 200 S&P/ASX 200 5766.00
98.80 1.74%
SHANGHAI Shanghai 2658.42
70.23 2.71%
KOSPI KOSPI Index 2135.96
39.10 1.86%
CNBC 100 CNBC 100 ASIA IDX 7808.03
154.13 2.01%

Trump and Xi hit pause

The moves in Asia came after Chinese President Xi Jinping and U.S. President Donald Trump agreed to a momentary pause on escalating the ongoing trade war between the two economic powerhouses.

“This is probably the best case scenario that markets were hoping for from the meeting of Trump and Xi and we’ve seen that anticipated ‘risk on’ rally this morning,” said Rakuten Securities Australia in a morning note.

They did, however, add that “analysts are already looking at the details and it doesn’t take long for doubts to come through on the strength of the agreement.”

“A simple look at the two press statements from either side shows some quite glaring differences of opinion and this could lead to a relatively short lived lift in investor confidence,” said the note.

A White House statement about the leaders’ dinner at the G-20 summit in Argentina said Xi and Trump discussed a range of nettlesome issues — among them the trade dispute that has left over $200 billion worth of goods hanging in the balance.

“President Trump has agreed that on January 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10 percent rate, and not raise it to 25 percent at this time,” the statement read. Over the next 90 days, American and Chinese officials will continue to negotiate lingering disagreements on technology transfer, intellectual property and agriculture.

On the back of that development, Dow Jones Industrial Average futures jumped 400 points shortly after the start of trading at 6 p.m. in New York on Sunday.

As of 8:36 p.m. ET Sunday, futures pointed to an implied gain of 411.54 at the open for the Dow.

Oil prices surge after November slump

Oil prices saw strong gains Monday morning during Asian trading hours. The international benchmark Brent surged 3.62 percent to $61.61 per barrel. U.S. crude futures jumped 3.95 percent to $52.94 per barrel.

The moves in the energy markets came after crude saw its worst month in a decade during November, amid concerns of oversupply and global politics.

West Texas Intermediate, or U.S. crude, lost 21 percent in November, tumbling to its lowest level in a year and logging its worst performance since October 2008.


The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.048 after touching highs above 97.5 last week.

Joseph Capurso, a currency strategist at Commonwealth Bank of Australia, said in a morning note that the U.S. dollar could “fall further over the next day or two” in reaction to the meeting between Xi and Trump.

“But we are not optimistic of a speedy resolution of their trade frictions. China is unlikely to do more than tweak its ‘Made in China 2025’ plan that so irks the US government,” he wrote.

The Japanese yen, widely seen as a safe-haven currency, was at 113.62 against the dollar after touching highs around the 112.9 handle in the previous trading week. The Australian dollar traded at $0.7350 after touching lows around $0.72 last week.

By Eustance Huang

— Reuters and CNBC’s Kevin Breuninger, Javier E. David and Keris Lahiff contributed to this report.


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