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US-China Trade Deal Expectations Send Global Stocks Soaring

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Global stocks surged on Monday as markets welcomed the news of the US and China likely sealing a trade deal as soon as this month.

Following Asian equities’ upbeat mood, the pan-European STOXX 600 gained 0.4 percent to €375.98, while MSCI’s All Country World Index added 0.4 percent to $505.75.

S&P 500 e-mini futures were also up by 0.3 percent in London.

Chinese shares gained the most on Monday, with the CSI 300 index advancing as high as 3 percent, before easing to close 1.1 percent higher to CN¥3,794.10.

The blue-chip index rallied last week after index provider MSCI Inc. announced its plans to expand the weighting of stocks in its main emerging-markets index by four-fold beginning in May.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent to $525.45 and has climbed nearly 10 percent so far this 2019.

Japan’s Nikkei soared by 1 percent to ¥21,822.04, while Hong Kong’s Hang Seng index surged by 0.5 percent to HK$28,959.59 and Australia’s S&P/ASX 200 gained 0.4 percent to A$6,217.40.

US-China Trade Deal Hopes

It was reported on Sunday that US President Donald Trump and Chinese President Xi Jinping could be close to reaching a formal trade agreement, seeing the progress in negotiations between the world’s two largest economies.

The two countries have hit tit-for-tat tariffs on billions of dollars worth of each other’s products, roiling financial markets, disrupting manufacturing supply chains, and pushing US farm exports down.

The US and China is seen nearing to an arrangement that would help roll back US duties on at least $200 billion of Chinese goods, according to a source familiar with the trade talks.

Research analyst Lukman Otunuga stated that the key question is will all tariffs be removed instantly, or will they be gradually dialed back?

While the renewed risk appetite is seen boosting European and U.S. stocks, investors should consider how much upside is left, given that markets have been actively pricing in the possible resolution to the trade saga, Otunuga said.

Brexit, Central Banks’ Policy Meetings in Focus

This month is expected to be vital for equity markets worldwide.

The UK parliament is due to vote on a deal to pull out from the European Union (EU), the Federal Reserve will hold a policy meeting that may provide hints about its plans for interest rates and balance sheet cut, and the European Central Bank (ECB) is set to hold its policy meeting this week.

Survey results last week underlined manufacturers’ struggles, specifically those who were vulnerable to the slowdown of the world’s second biggest economy, and further raised the possibility that central banks are done tightening monetary policy.

Activity in the US manufacturing sector weakened in February to hit its lowest level since November 2016, with consumer confidence ending below forecasts, inflation subdued, and US personal income registering its first drop in more than three years in January.

Analysts stated that the tamed inflation reinforced the US central bank’s patient stance on increasing interest rates.

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